Invest in etfs

Best Gold ETFs to invest in India

Invest in ETFs
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Best gold ETFs to invest in

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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Key pitfalls of investment that every investor must avoid.

“The stock market is a device for transferring money from the impatient to the patient.”
-Warren Buffett

Your investment portfolio should consist of those products that match your needs and works towards your financial goals. Investment is a must these days. Because investments allow an individual to create a corpus, but they also enable us to earn a good return on the savings and can even generate regular income if done right. If you are a first-time investor or have been in the investment game for a while, you should consider these points and that will surely help you in your investment tactics and will also maximize your long term returns.

Mentioned below are the few factors that can help you find the right type of investment:

1. Understanding your financial product

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KYC- Know your customer

Follow these rules to improve your investments

“As we look ahead into the next century, leaders will be those who empower others.”
-Bill Gates

Investments are essential in today’s world because earning is not enough. You would be working hard for the money, but that may not be adequate for you to lead a comfortable lifestyle or fulfill your dreams and goals. And due to this reason you need your money work hard for you as well. And this is the reason you should invest. If your money is lying in a bank account, then you are losing the opportunity of earning returns on it. You should spend your money smartly by investing so that you can get profits from it.

Here are the rules of investment one must follow:

  • Have a plan

Before you invest your money, you must be aware of what you are investment purpose. You should set parameters like target return, time horizon, and risk appetite for the asset class, which suits your aims. You are unique, and so are your financial needs, so choose an investment plan based on your specific financial plan.

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Is equity exposure safe?

Equity-Exposure

“Long shots almost always miss the mark.”
—Peter Lynch (American investor and mutual fund manager)

What is an equity fund?

Equity funds generate high returns by investing in the shares of companies of different market capitalization (large cap, mid cap & small cap). They generate high returns than debt funds or fixed deposits. The whole thing depends on is how the companies performance, which results in profit or loss and how much an investor can make based on his shareholdings.

Market Capitalization:

It is the aggregate value of the company based on the current share price and the number of outstanding stocks. Market cap is calculated by multiplying the current market price of the company share with the total outstanding shares of the company.

How does equity fund work?

An equity fund invests 60% or more of its assets in equity shares of companies in varying proportions. It might be the purely large cap, mid cap, or small cap fund or a mixture of market capitalization. The investing may be by value-oriented or growth oriented. Allocating a major portion of equity shares, half will go to debt and money market instruments. This will take care of a sudden fall in the market.

Performance of Equity funds in India:

All most all categories of mutual funds, equity funds deliver the highest returns. On average, equity funds have generated before-tax returns of 15% or more. The returns may fluctuate as per the market movements as well as the economic conditions.
To earn returns with good expectations, you need to choose your equity fund carefully. If you want to invest in Equity, remember the secret is to stay invested for a long period (>5 years).

Features of Equity Funds:

  • 80C tax exemption: Equity Linked Savings Scheme is the only tax-saving investment under Section 80C of the Income Tax Act. With the shortest lock-in period for 3 years.
  • Cost of investment: When one is frequently buying and selling equity shares it often impacts the expense ratio. While currently, SEBI has fixed the limit of expenses ratio at 2.5% for equity funds and they are planning to reduce the rate too.
  • Cost-efficiency and diversification: One who is investing in equity funds can start investing at a nominal amount.
  • Holding period: When one redeems the units of capital funds, one can earn a capital gain. This earned capital is taxable and this rate of taxation depends on how long you stayed invested in equity.

Taxation of Equity Funds:

Capital gains earned on the holding period of up to one year are called short term capital gains (STCG). STCG is taxed at a rate of 15%. Capital gains on the holding of more than 1 year are called long term capital gains (LTCG). LTCG in excess of Rs 1 lakh will be taxed at 10% without the benefit of indexation.

So what is better lump sum or SIP?

1. Systematic Investment Plan (SIP)

A SIP is where the monthly investment happens automatically on the pre-decided date. Where one can start investment from Rs. 500. Where we have to just grant permission to the fund company to deduct the investment from your bank account. SIP gives you the benefit that when the market is high you would be allowed a few units. And when the market is low, you will get more units.

Benefits of SIP:

  • SIP is considered to be a disciplined approach to investment.
  • One can achieve long term financial goal with SIP.
  • SIP can be started with a small amount of money.
  • Reduces risk because of Rupee cost averaging.
  • Timing the market is not necessary.

2. Lump-sum

This method can work over time. Because not everyone is feasible to arrange for a large sum. A SIP allows an investor to invest a fixed amount of money at regular intervals. It also gives an advantage of averaging the cost of units besides providing benefits of compounding. So we can say that opt for SIP rather than Lump sum investment.

You should invest in equity funds as per your investment objectives, your investment capabilities, and your risk-taking ability. Equity funds are not meant for short term investment. Maximum your funds will cook for five years of investment, accepting the versatile market one should invest in mutual funds.

Finity

Finity offers you to invest your funds in Equity. Being a smart investor one should choose the best investment option. One should always opt for investment which matches their financial goals and risk appetite. Equity definitely gives more returns than gold, real estate, and FDs.

Happy Investing!!