Investing in Gold ETFs. The Safe Way to Play the Gold Game!


Gold is considered as one of the ever booming investment platform that yields more and steady returns than any other investment. It counters the effects of inflation and exchange rate fluctuations, providing a solid base for the investors to earn more profits. Though the market has seen a terrible decline in the wake of 2013, the metal has managed to garner more than 27% of annualised return in the past five years.

However, with the sudden slump in the gold market, investing in gold ETFs is the smartest way to opt. Gold ETFs provide an opportunity to investors to save gold over a given period of time. Since it can be purchased in small quantities, one can plan the procurement as per future requirements. There is no risk of theft and one need not worry about the storage cost (as in case of physical gold) because such units are held in demat or paper form. In the case of physical gold, one ends up paying extra for making charges as well, but there is no extra charge applicable in gold ETFs. When needed, one can exchange them in multiples of 1 kg units of 0.995 purity.


Hi MKumar,

We agree. The advantages of gold ETFs are:

• Transparency: Similar to stocks and shares, gold prices on the stock exchange are transparent. You can know the value of your portfolio by checking the prices of gold on stock exchanges.
• Easy to trade: The minimum bundle or lot that you need to purchase to start trading in ETFs is 1 unit. i.e. 1 gram of gold. You can buy and sell the units through your stock broker, just like equities.
• Cost-effective: If you invest in a gold ETF listed on the stock exchange, there is no entry or exit load – a type of charge that is to be paid to buy or sell units. The brokerage charges are very low – 0.5 percent to 1 percent.
• Lower risk: Fluctuations in gold prices are generally not as high as in equities. This means that even if your returns on equities go down, gold ETFs could act as your safety net. It will prevent you from incurring large losses.
• Tax benefits: While gold ETFs attract long-term capital gains tax after one year, you do not have to pay VAT, Wealth Tax or Securities Transaction Tax on them.

To invest in gold ETFs, you need to:

  1. Choose a gold ETF product/fund manager: Gold ETF products are offered by several banks and private financial institutions. Once you choose a product, your ETF fund manager will act as your stock broker on the NSE and buy and sell the gold on your behalf. This process is just like trading in stocks and shares.
  2. Open a demat account: Since gold ETF is a security that is bought and sold in electronic, dematerialised form, you need to have a demat account to trade in them. You can open a demat account through a stock broker you have selected.

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BB Expert