Managing finance effectively is all about making smart investment choices. The stock market, mutual funds, cryptocurrency, gold ETFs, etc. are the buzzwords of the twenty-first century. You might want to invest in gold ETFs but fear whether it is a good deal or a risky business. Don’t worry; this article will help you sift through everything and weigh the pros and cons of gold ETFs.
In this article, you will learn about gold ETFs, the benefits of investing in them, and the 5 best gold ETFs in India where you should preferably invest.
What are Gold ETFs and why should you think about investing in them?
Buying gold physically might not seem right for many people just because of the fear of crashing the gold market. And the prices might go down in the future, which increases the risk of losing the viability of the commodity. However, to be in the business without even investing in it might sound crazy, but it is possible.
And the best possible way to accomplish that is to buy gold ETFs. Gold ETFs, or Exchange Traded Funds, are a type of investment where you buy a commodity exchange-traded fund as a substitute for gold without even buying gold. The underlying asset is always gold, it is just another way to be present in the gold investment without purchasing it.
To invest in a gold ETF, you must have a Demat account in your name, and you can use this account to invest through online platforms.
Here, one unit of gold ETF is equivalent to one gram of physical gold, which you can trade through the National Stock Exchange (NSE) or Bombay Stock Exchange (BSE).
What are some of the exclusive benefits of investing in Gold ETFs?
Here are some of the benefits of investing in gold ETFs:
- Purity as a major factor:
Investing in gold ETFs is a profitable business because of the purity factor. Since one unit of gold ETF is equivalent to one gram of pure gold, you always have the advantage of knowing the value of pure gold.
- No problems with storage:
Because there is no longer a storage issue, investing in gold ETFs can be a great investment.
It is because you are buying a substitute for gold online in dematerialized form rather than actual gold. You don’t need a gold locker or to worry about where you keep the gold, ETFs help you curb the fear of theft.
- No making charges:
In any case, everyone mostly buys gold in the form of jewelry, which costs almost 10% to 15% of the amount of the actual gold. However, because there are no such fees, purchasing ETFs may be a better investment.
- Trading is easy:
With gold ETFs, you can buy or sell them online through online trading according to your convenience. But if you have physical gold, it would be difficult for you to sell or trade it. Most often, you won’t get the right price and will have to settle for a lesser price.
- No tax:
If you buy physical gold, you have to pay VAT (Value Added Tax), sales tax, etc., which adds extra cost to the commodity. But, if you are buying ETFs, you don’t need to pay any of the above taxes.
What are the top 5 gold ETFs where you should invest your money?
Here are the top 5 gold ETFs where you should invest your money in 2022:
- HDFC Gold ETF:
HDFC gold ETF is one of the best ETFs because of the returns it provides in the form of interest concerning tracking errors. The monthly return is about 13.5%, which happens to be a decent number. Similarly, for three months, the interest goes up to 15.4 percent but eventually comes down as the months go by.
- SBI Gold ETF:
This is the second most chosen option for investing in gold ETFs, as this is a dependable source. The interest rate for the first month is about 13.5 percent, which increases to 15.5 percent in three months. By the time it hits 6 months, the interest rate remains at 15 percent but goes down to 7 percent by the time it’s been five years.
- Axis Gold ETF:
This is also a very popular option where you can invest in your gold ETF, which registered itself in December 2015. In the first month, the interest rate is 13.4%, which then goes up to 15.4% in the first three months and 14.% in the first six months. But at the end of five years, the interest rate goes down to 6.7%.
- ICICI Prudential Gold ETF:
At the end of 2015, ICICI registered itself in the gold ETF business, and since then it has been praised by investors. For the first month, the return is about 13.5%, which then goes up to 15.4% in the first three months and 14.6% in the next six months. At the end of 5 years, the interest rate goes down to 6.8%.
- IDBI Gold ETF:
In the first month, the IDBI gold ETF gives you 13.5% and 15.4% in the first and third months, respectively. But as we eventually move forward to two years, the interest rate goes down to 1.1%, which is a massive decline.
So, it is crystal clear that investing in gold ETF is a profitable short-term investment that has promising returns. You should weigh the pros and cons before investing in it, as there are some market-related risks associated with it. To choose which ETF best serves your interests, visit their website and see what they offer.
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