Today is Akshay Tritya, an auspicious day to buy gold. But, if you are someone who is looking to buy gold, but not in physical form, there are a few options out there, like exchange traded funds or ETFs.
On the Akshaya Tritiya day, gold is bought for traditional reasons. However, there are a few among Indian consumers who buy gold for investment reasons as well. After all it is safe-haven against inflation and currency fluctuation. And at a time when global geo-political uncertainties are heightening, gold is indeed a safe investment option. Currently, tension between US and Norther Korea, Middle east, worries around Euro zone is definitely increasing hte investment appeal for the yellow metal.
Advantages of ETFs: There are many. For one, underlying asset for the ETF is gold of 99.5 purity guaranteed by the AMC. Also it’s easy to hold, thanks to its dematarilised form. It simply helps in savings on the cost of storage as well as risk of security. More over its pricing is transparent as well. They offer better liquidity than physical gold as they are listed on the stock exchanges. You can buy and sell gold ETFs whenever required provided the stock exchanges are open. There is neither entry load nor exit load for gold ETF. Moreover, you can even get loan against gold ETF.
You don’t need a lot of money to buy gold ETF. You can buy a minimum of 1 unit of gold, which is equal to 1/10th of 1 gram or 1 gram of gold – to start trading in gold ETFs.
Which Gold ETF to choose: Since the underlying asset of all the gold ETFs is same, all of them perform pretty similar to each other. The thing which differentiates a gold ETF from one fund house to another is tracking error and expense ratio. Tracking error is the difference between ETF’s returns and gold’s returns. So while investing in gold ETF compare tracking error and expense ratio. The lower these numbers, the better.
Important tip: Ideally, you should not have more the 5-10 percent of gold in your financial portfolio. So if you are planning to buy gold today, make sure you don’t go overboard.
Updated Date: Apr 28, 2017 11:20 AM