Gold Exchange Traded Funds – Is it a good investment option?

What are Gold ETFs?

Gold ETFs are open ended mutual fund schemes that will invest in stan­dard gold bul­lion. Through gold etfs the buyer holds gold in paper form rather than phys­i­cal form. Gold ETFs are pas­sively man­aged funds. It works sim­i­lar to a mutual fund; investors can buy and redeem units from the mutual fund or from the stock exchange.

Why Gold ETFs

Has­sle free investment

Invest­ment in gold ETFs elim­i­nates draw­backs of phys­i­cal gold — cost of stor­age, liq­uid­ity and purity, among others.

Small denom­i­na­tions

Gold ETFs allow invest­ment in gold in small denom­i­na­tions, which makes it eas­ier for the retail investor to participate.

Tax advan­tage

Invest­ing in gold ETFs gives investors tax advan­tages over invest­ing in phys­i­cal gold. Gold ETF units held for more than one year qual­ify for long-term cap­i­tal gains, whereas the hold­ing period in phys­i­cal form has to be three years to qual­ify for long-term cap­i­tal gains. Gold held in paper form is not liable for wealth tax.

Should you invest in Gold ETF?

Before you decide to invest in gold ETF, you need to under­stand “Gold as an invest­ment Option”. Basi­cally every port­fo­lio should have expo­sure to gold ETF as it reduces volatil­ity in a well-diversified port­fo­lio. It also pro­tects the cap­i­tal against infla­tion and pro­vides inflation-plus returns.

Related posts:

1. All about Gold ETFs
2. Gold as an invest­ment option
3. HDFC Gold Exchange Traded Fund — A Gold Exchange Traded Fund
4. Exchange Traded Fund – Basics
5. Gold ETF in India