5 things to know about gold exchange traded funds
Though Indians have always had an affinity for gold, not until very recently were the first Gold Exchange Traded Funds started. The underlying asset of these funds is gold as can be decoded from their names. These funds give investors exposure to the Indian gold market. Let us know 5 things about these funds.
1. What are Gold ETFs?
The Gold Exchange Traded Funds are mutual funds that are based on the price of gold. Physical gold cannot generate income. Also, making charges tend to be high. These funds offer investors an opening into the gold market. Gold tends to be less volatile and can beat inflation in the long run. One unit of these Gold Exchange Traded Funds is equal to one gram of gold on the date of allotment. As the value of gold rises, the stock price would rise as well. Thus, investors get the dual benefit of investing in gold along with that of stock trading.
2. Who should invest in these funds?
The investors who are trying to further diversify the portfolio and would like to get exposed to the gold market should try Gold Exchange Traded Funds. The invested money is invested towards the standard purity of gold bullion at 99.5%. Even though they are traded on the stock exchange, they tend to have very low risks. They can also be very beneficial as the investors would not have to worry about storage and additional taxes.
3. Gold EFTs have a lot of benefits
Gold EFTs can be bought and kept in the Demat account. Also, these funds are very liquid and can be traded at current rates. Also, a buyer with very small denomination can invest in gold. These gold exchange traded funds can be easily bought and sold at the stock market. Transactions here are safe and profitable. Unlike physical gold, there would be no issue with safety and storage of the gold units. Also, the money earned from these funds is subject to long term capital gains tax.
4. How does the Gold ETFs work?
Physical gold supports the Gold ETFs as security. For instance, if you are investing in Gold ETF, some person is actually buying gold. Investors are given guarantee about the purity of the gold. The funds follow the latest market cost, termed as the spot price of gold. The National Stock Exchange allows an Authorised Member or Participant to handle the purchase and sale of Gold Exchange Traded Funds.
5. Gold ETFs are much more profitable to physical gold
While the exchange traded funds can be an investment, physical gold does not earn you any money. These funds can be used for short-term or long-term financial goals. Also, you would not have the trouble of store the gold and face all the risks with possession. While making a charge for physical gold can be pretty high, fund management charges do not cost a lot.
These are some of the most important things you should know about Gold ETFs.
