Is it a good idea to invest in gold ETF?
Question
Gold did turn out to be a safe haven for many investors during the time of economic crisis in the past year. And although gold prices have decreased since August 2020, it has been noted that the number of new folios added to the Gold exchange-traded fund (Gold ETF) category has increased from 5.26 lakh in March 2020 to 12.99 lakh in March 2021*. It has Rs. 14,122.72 Crore in net assets under management as of March 2021*.
Answer ( 1 )
Invest in Gold ETF is a passive investment vehicle that are based on gold prices. Gold ETFs invest in 995 pure physical gold.
Because of its uniform pricing and complete transparency across domestic geographies it becomes easier to buy/sell units of Gold ETFs.
Since it is purchased in a dematerialized form, you eliminate the hassles of storage and security and enjoy the convenience of digital investing.
You can purchase Gold ETFs easily through stock exchanges or by contacting stock broking companies, Mutual Fund Distributors and other intermediaries.
You can purchase as low as one unit which is equivalent to one gram of physical gold.
Since they are listed and traded on stock exchange, they offer high liquidity.
You do not have to pay additional taxes like wealth tax, security transaction tax, VAT or sales tax.
They do not have an entry or exit load.
They are also accepted as collateral for loans.
All these reasons have led to Gold ETF being one of the popular investment vehicle for gold investments among informed investors.