Gold has played a culturally vital role in India. It is widely adored in different forms. For centuries, several women have relied on gold jewelry for their financial well-being, and many others, including men, have used the yellow metal for investment purposes. Taking this affinity to gold a notch higher is the new-age gold investment – the gold exchange-traded fund, also known as the gold ETF. Let’s find out more about it and its advantages.

What is a gold ETF?

A gold ETF is an open-ended mutual fund online scheme. It invests in gold bullion, and each unit of a gold ETF represents physical gold of 99.5% purity. A gold ETF unit is equivalent to one gram of gold. Since these are a type of ETFs, they are traded on the stock exchange like stocks. In India, they are listed on the National Stock Exchange of India (NSE) and Bombay Stock Exchange Ltd. (BSE).

What are the advantages of gold ETFs?

Investing in gold ETFs can offer you the following benefits:

  1. High liquidity: Gold ETFs can be bought and sold like stocks. This makes them highly liquid. You can buy and sell them as per your goals. Compared to physical gold that has very low liquidity, Gold ETFs can be used for multiple immediate goals.
  2. Smaller denominations: Buying physical gold can be restrictive because of the high values involved. It may not suit everyone’s budget. But gold ETFs offer smaller denominations that can easily fit any investment budget. In fact, you can invest in ETFs through a SIP (Systematic Investment Plan) or in a lump sum.
  3. Cost-effectiveness: Traditional forms of gold like gold bars, jewelry, etc., can attract high making charges. However, gold ETFs offer an affordable and cost-effective solution with minimal charges. The mark-up is low, and all you pay are some brokerage and maintenance charges that are a lot less than making charges. In addition to this, the investment value of gold ETFs remains uniform throughout the country. Physical gold, on the other hand, may differ in price at different jewelry shops across the country.
  4. No hassles: It can be problematic to store physical gold. Bank lockers always charge a fee, and storing gold at home can be risky because of the fear of theft. Gold ETFs remove all these issues by offering you a digitized solution. Your gold ETF investments are stored in your Demat account. So, you can use a single Demat account for all your investments, such as mutual funds online, other ETFs, futures and options, derivatives, commodities, etc., and simplify investment management.

To sum it up

Gold ETFs offer a guarantee of purity that may be hard to find in the case of physical gold always. There are often scams and frauds where sellers mix inferior metals with gold to make a profit. So, as a consumer and investor, you stand to lose out a lot. However, investing in gold ETFs removes these hassles and offers you easy solutions with 99.5% purity, low investment costs, zero storage hassles, and more.

If you wish to invest in gold ETFs, you can check out the Tata Capital Moneyfy app and browse through the many options available.

Eve Nasir

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