Gold ETF: Learn what Gold ETFs are, how to buy them, and what are the benefits of investing in them?
Investing in gold has always been a top choice for Indians. Previously, people only bought physical gold in the form of jewelry or coins, but times have changed. Today, you can also invest in gold digitally. Gold ETFs are one such smart option, allowing you to benefit from fluctuating gold prices without buying physical gold. The good news is that even expensive gold can now be purchased with a small budget through this method. Learn more about it here.
What is a Gold ETF?
A Gold ETF, or Gold Exchange Traded Fund, is a type of mutual fund that tracks the price of gold. Investment in it is done through the stock market, and it is bought and sold on the BSE and NSE like shares.
You don't receive physical gold; instead, the investment is in electronic form. When you sell a Gold ETF, you receive money based on the prevailing gold rate at that time.
Major Advantages of Investing in Gold ETFs
1. Easy Investment with Less Money
Gold ETFs are bought in units. Typically, one unit represents 1 gram of gold. Even if you don't have a lot of money, you can start investing by buying one or two units. In contrast, physical gold requires a minimum expenditure of 4-5 grams. Gold ETFs can also be invested in through SIPs (Systematic Investment Plans).
2. No Security Concerns
Buying physical gold comes with the worry of theft and secure storage. This problem is eliminated with Gold ETFs, as they are held electronically in your demat account. You have to pay an annual demat account charge, but the worry about the security of your gold is gone.
3. No Making Charges
When buying jewelry, you have to pay hefty making charges in addition to the price of gold, making it expensive. With Gold ETFs, there are no management charges. You only have to pay approximately 1% or less in brokerage and an annual expense ratio of about 1%, which is significantly less compared to the cost of jewelry.
4. Complete Guarantee of Purity
The gold invested in through Gold ETFs has a purity of 99.5%. In addition, ETFs experience less volatility compared to direct investments in the stock market, which helps in controlling risk.
5. Can be used as security for loans
If you need to take out a loan in the future, Gold ETFs can also be used as collateral. They can also be bought and sold quickly and easily when needed.
How to invest in Gold ETFs
To buy Gold ETFs, you first need to have a Demat account.
After opening a Demat account, you can buy Gold ETF units available on the NSE or BSE.
The amount for the units you buy is deducted from your bank account linked to your Demat account. These units are credited to your Demat account within one or two days.
You can sell them anytime through your trading account.
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