Gold exchange traded funds (ETF) are mutual funds, whose units can be traded on the stock exchanges, just like shares of companies. Some of the mutual fund houses to have launched gold ETFs are Benchmark Mutual Fund, UTI Mutual Fund, Kotak Mutual Fund, Reliance Mutual Fund and Quantum Mutual Fund. As gold ETFs are held in the demat format, any individual wanting to invest in these schemes needs to have a demat account.
One can either invest in these mutual funds during new fund offer (NFO) periods when the scheme is launched or buy gold ETF units from NSE. Investing during the NFO period would attract entry load, which differs from one mutual fund to the other, and have a minimum investment amount. Post NFO, however, there would be no entry charge, but a brokerage charge of as low as 0.4-0.5% would be levied by your stock broker.
Investment in Gold ETF through SIP (systematic investment plan) is also permitted in some of the GOLD ETF schemes.
To get finer details of Gold ETF visit following previous articles of GConnect
Investing in Paper Gold is getting popular nowadays as a reult of benefits we get out of it
If you want to accumulate Gold for your daughter’s marriage, Gold ETF is the right choice. With gold ETFs in the market, one needs to wonder whether purchasing gold bars or jewellery is really the best way? By the time the daughter reaches her marriageable age, chances are that the designs of the jewellery accumulated would be outdated. Additional expenses would have to be incurred as making charges if the old jewellery is moulded into new ones.
Your savings as low as the amount equivalent to one gram of Gold could be invested in a disciplined way each month in Gold ETF. In contrast , buying physical gold each month for a small amount may not be possible.
On several counts, purity of gold cannot be confirmed. The buyer has to keep faith in the local jeweller and would know of the purity only when he tries to sell the gold in times of need. Yes, there are banks that offer certified gold, but remember that banks charge a premium of nearly 15% for the coins they sell. In contrast in Gold ETF you will be paid the market value for the pure Gold accumulated in your account on the date of redemption
In the Liquidity aspect, both physical Gold and Gold ETF could be treated at par as both can be sold in the market at any time. However, selling physical gold in the market may involve burden of wastage charges of around 10 % to 15% arises on account of re-moulding to be borne by the seller. Gold ETF has got not no such impediments. One can sell Gold ETF either partly or in full at any time after 3 days from the date of purchase.
Safety of Physical Gold you buy is also very important. There are costs associated with storing in terms of fees paid for a bank locker and for insuring gold. Gold ETF has no such hassles.
The only clear and present danger after you start investing in Gold ETF is you may not be in the good books of your wife as paper gold will never attract neighbours envy to make your wife pride.