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Best Gold ETFs to Invest in India

  • Akshatha Sajumon
  • Jan 16 2022
  • 9 minutes
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Gold has always held a special place in Indian households. Every household in India has invested in gold at one point in time or another. However, today there are many other options available in the market for investors who wish to have a safer mode of investment in gold without the added burden of security of the yellow metal. Gold bonds, gold mutual funds, gold ETFs are a few examples of such investment. Among these, gold ETFs have gained huge popularity in recent years on account of investor awareness and unique products that provide the benefits of safe investment and better returns.

Gold ETFs are like any other ETFs that can be traded in the open market. These ETFs are commodity ETFs and follow the prices of physical gold in the domestic market. Investment in gold ETFs is in the form of units where each unit represents one gram of gold of highest purity (99.5%).

Features and advantages of Gold ETFs

Gold ETFs have become quite popular in recent years since the time they were first incepted in India in the year 2002. These funds are traded on BSE and NSE and can be held by the investor in their Demat account. These funds have many advantages over other forms of investment in gold like physical gold or gold bonds or even other forms of investments like mutual funds. Some of such features and advantages of Gold ETFs are mentioned below.

  • Lower risk

Investing in gold ETFs like any other ETFs is less risky. The investment is made in digital form in the Demat account. This results in zero storage cost which is one of the highest costs associated with an investment in physical gold. The investment in gold ETFs being in digital form also does not have any concerns of purity or theft.

  • Easy trading

Gold ETFs can be traded in the open market during market hours. The investors simply need to open a Demat account to hold the securities and a trading account to actively trade them.

  • Tax benefits

The cost of taxation for gold ETFs is lower than that of physical gold. Gold ETFs are subject to only capital gains as against physical gold which is subject to VAT, sales tax, or wealth tax.

  • Lower costs

The highest costs associated with physical gold is the storage and security cost for such assets. Gold ETFs do not have such costs. Also, the expense ratio for gold ETFs is quite lower as compared to other investment products like mutual funds.

  • Hedging instrument against inflation

Gold has been one of the safest investment products even in adverse market conditions. Gold ETFs can be used as a successful hedge against inflation or currency volatility.

  • Transparent investment instrument

One of the biggest drawbacks of gold is the price variations throughout the country. Gold ETFs are not subject to such price variations or any hidden charges. This ensures that there is transparency in trading in gold ETFs.

Things to consider before investing in Gold ETFs

Investment in Gold ETFs is considered to be among the safer investments in the market. Investors get the benefit of the ever-increasing prices of gold, security, and returns at lower costs of investment. There are certain factors that have to be considered while making an investment in gold ETFs. Some of such factors are discussed below.

  • Historical performance

One of the first points of considerations for investment in gold ETFs is the historical performance of the fund. The investor has to consider the past performance along with the Assets under management (AUM) of the fund. This will tell the value of the assets managed by the fund which in turn will reflect its reliability and expertise of the fund managers.

  • Volume of trade

Liquidity is another aspect that has to be considered while investing in an ETF. The investor has to consider the volume of trade of the Gold ETF before making the investment decision. An ETF with a higher trading volume will have higher liquidity and is thus preferred by an investor.

  • Reduced tracking errors

Gold ETF like any other ETF tracks the underlying asset or index for its performance. However, this tracking is often subject to certain errors or deviations. These errors are known as tracking errors that are part of any ETF. Investors have to consider a Gold ETF that has the least tracking errors which will result in higher returns for the investor.

  • NAV of the Fund

Apart from the above considerations, the NAV of the fund is another important factor influencing the investment decision. NAV of the fund refers to the per unit value of the ETF hence it has to be given due importance in making the decision to invest.

  • Other points 

Some of the other points of considerations while choosing a Gold ETF are,

  • The investment goal of the investor
  • The risk appetite of the investor
  • The expertise of the fund manager
  • Diversified or balanced investment between different asset classes to have higher returns.

Top Gold ETFs in India in 2021

There are many options for investors to invest in Gold ETFs today. Some of the top-performing Gold ETFs currently in the market are mentioned below.

  • Nippon India ETF Gold BeES

This fund was launched in 2007 and has been providing good returns to the investors since its launch. Some of the details of the fund are mentioned below.

Particulars Details
Fund manager Mr. Mehul Dama
Launch date 8th March 2007
Minimum investment Rs. 10,000
Expense ratio 0.82
Risk Moderately High

The returns provided by the fund as of 6th April 2021 are tabled below

Period 6 months 1 yr 3 yrs 5 yrs Since launch
Returns -11.35% 1.47% 12.93% 8.04% 10.72%

 

  • Kotak Gold ETF 

This fund was launched in the year 2007 and provides returns based on the domestic prices of gold. Some details of the fund are mentioned below.

Particulars Details
Fund manager Mr. Abhishek Bisen
Launch date 27th July 2007
Minimum investment Rs. 5,000
Expense ratio 0.55%
Risk Moderately High

The returns provided by the fund as on 6th April 2021 are tabled below

Period 6 months 1 yr 3 yrs 5 yrs Since Launch
Returns -11.44% 1.24% 12.94% 7.99% 11.55%

 

  • Aditya Birla Sun Life Gold Exchange Traded Fund

This fund was launched in the year 2011 and is categorized as a moderately risky fund. Some details of the fund are mentioned below.

Particulars Details
Fund manager Mr. Lovelish Solanki
Launch date 13th May 2011
Minimum investment Rs. 5,000
Expense ratio 0.49%
Risk Moderately High

The returns provided by the fund as of 6th April 2021 are tabled below

Period 6 months 1 yr 3 yrs 5 yrs Since Launch
Returns -11.44% 1.35% 13.01% 8.08% 6.45%
  • SBI Exchange Traded Fund Gold

This fund was launched in the year 2009 and has been providing decent returns to investors. Some details of the fund are mentioned below.

Particulars Details
Fund manager Mr. Raviprakash Sharma
Launch date 28th April 2009
Minimum investment Rs. 5,000
Expense ratio 0.51%
Risk Moderately High

The returns provided by the fund as on 6th April 2021 are tabled below

Period 6 months 1 yr 3 yrs 5 yrs Since Launch
Returns -11.46% 1.22% 12.92% 7.96 8.77%
  • Invesco India Gold Exchange Traded Fund

This fund was launched in the year 2010 and has been providing returns based on the prices of gold. Some details of the fund are mentioned below.

Particulars Details
Fund manager Mr. Krishna Cheemalapati 
Launch date 12th March 2010
Minimum investment Rs. 5,000
Expense ratio 0.45%
Risk Moderately High

The returns provided by the fund as of 6th April 2021 are tabled below

Period 6 months 1 yr 3 yrs 5 yrs Since Launch
Returns -11.45% 1.28% 13.05% 8.9% 8.32%

Conclusion

Gold ETFs are among the favoured investment products for risk-averse investors who wish to invest in gold but also want to stay away from the risks of a conventional investment in gold. Like any other investment, gold ETFs are also subject to risk and thus, investors have to do good market research before investing in the same. 


Frequently Asked Questions

Are gold ETFs subject to any exit loads like mutual funds?
Yes. Many gold ETFs are subject to levy of exit loads of 1% to 2% (depending on the guidelines of the fund) of the units that are redeemed within 1 year from the date of the initial investment.

Can gold ETFs be used as collateral for loans?
Yes. Some lenders accept gold ETFs to be used as collateral for loans like any other security or physical gold (provided it is as per the guidelines of the lender).

Can Gold ETFs be traded in open markets?
The ability to be traded in the open market is the fundamental feature of any ETF. Gold ETFs also, like any other ETFs can be traded in the open market during market hours.

What does the gold ETF represent?
Gold ETFs track the domestic prices of gold which are the same throughout the country as against prices of physical gold that differ statewide. They represent the value of gold bars that are backed by the highest priority of gold (99.5% purity).

 

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