How to Invest in Gold ETF

26 August 2022
5 min read

Indians are known to be passionate about Gold. This distinctive precious material has a great deal of value in addition to having a potent emotional pull. It is something that characterizes ancient Indian culture.

There are numerous options to invest in Gold in India, online as well as offline, wherein the offline options include investing in Gold Jewelry, Gold Bars, and Gold Coins, and the online options include Gold Mutual Funds, Sovereign Gold Bond Schemes, and the star of this blog, Gold ETFs.

This blog will delve into the fascinating world of Gold ETFs or Exchange-Traded Funds.

Gold ETF Meaning

A Mutual Fund based on commodities that invest in assets like Gold is known as a Gold ETF or Gold ETF investment. These Exchange-Traded Funds operate and are traded on the stock exchange like individual stocks.

In this case, physical gold is represented by Exchange-Traded Funds in both dematerialized and paper form. Instead of purchasing actual gold, an investor invests in stocks, and once those stocks are traded, they are credited with the cash equivalent of each unit.

Points to Bear in Mind When Investing in Gold ETFs–

If you want to invest in gold ETFs and need to find answers to how to invest in gold ETF, here are some pointers you might find helpful:

  1. Given that long-term returns on gold are frequently as low as 10% annually, gold is better suited as a short to medium-term investment. 

  2. While choosing a Gold ETF or Fund Manager, do not opt for one solely depending on the low fees. Instead, examine the fund's performance in recent years to understand how effectively the Fund Managers manage the accounts. 
  1. If you intend to invest a lot of money or engage in frequent trading, Gold ETFs will be more financially viable than other gold-based investments.
  1. Avoid making large or sustained investments in gold. Instead, it is a good idea to allocate 5–10% of your investment portfolio to gold ETFs. Additionally, this will keep your portfolio solid and your returns consistent.
  1. Seeing as brokerage or commission fees for gold ETFs range from 0.5% to 1%, it is advisable to look around the ETF market for a stockbroker or fund manager with reasonable fees.
  1. Watch your account and the trades being executed for you if a fund manager monitors your Gold ETF. You can raise the effectiveness of your portfolio with the routine analysis.
  1. If you are concerned about what will happen to your money, consider that SEBI regulates Gold ETFs and that each unit is supported by actual gold. 
  1. Before beginning any transactions, keep an eye on the price trends for gold. You might want to purchase gold ETFs at bargain prices and then sell them as the price rises, just like with stocks.

How to Buy Gold ETF in India?

If you’re wondering about how to buy Gold ETF or how to buy Gold ETF online, this next section explains precisely that. Read on!

STEP 1: The first and most crucial step is to work with a stockbroker to start an online Trading and DEMAT Account.

STEP 2: Next, enter your Login ID and Password on the broker's online trading portal website to log into your account.

STEP 3: You must choose the Gold ETF you want to invest in in the third step. You can either buy it all at once or regularly with systematic SIPs.

Note: Additionally, you have the option to select Mutual Funds that have an innate gold ETF.

STEP 4: Place the buy order for a specific quantity of Gold ETF units in the following step.

STEP 5: You will receive a confirmation message on your Phone or Email Address.

STEP 6: The web system will then use a linked Savings Account to debit your bank account for a small fee.

Benefits of Investing in Gold ETF Funds

Investing in Gold ETF Funds has several advantages over buying and storing physical gold. Let's examine the reasons why it might be a good investment choice.

  • Simplified Trading

Buying and selling Gold ETFs is similar to buying and selling any other equity-based fund. However, it simplifies everything, especially if the person trades stocks through a stockbroker or an ETF funds manager. In addition, they can be traded during business hours and are much simpler to liquidate.

Additionally, the stock exchange makes public information about gold prices available. It creates transparency throughout the process and enables investors to monitor changes, even hourly.

  • No Entry & Exit Loads

There are no entry or exit loads for Gold ETFs, so there are no extra fees associated with buying or selling these funds. As a result, only 0.5% to 1% of each transaction's cost goes toward brokerage for investors.

  • Tax Advantages

Aside from capital gains tax, these traded funds are exempt from Value Added Tax, Securities Transaction Tax, and VAT, allowing investors to defer paying taxes on their investment.

A person who invests in physical gold may be subject to wealth taxes, mainly if they buy a lot of gold jewellery or gold bullions. Therefore, investments in gold ETFs are better for tax savings because they are not subject to wealth taxes.

  • Minimal Market Risk

Gold prices typically fluctuate by small amounts, which makes it possible to avoid significant losses even when returns on stocks decline by large amounts.

Conclusion

Unlike physical gold, investments in gold ETF India produce income through returns. They may also be used as loan collateral.

Due to these, gold ETF is a wise investment choice. You should think about investing in gold ETFs if you want to protect your portfolio. You are prepared to allocate a portion of your portfolio to gold ETFs once you have a firm grasp of these fundamentals.

Disclaimer

The stocks mentioned in this article are not recommendations. Please conduct your own research and due diligence before investing. Investment in securities market are subject to market risks, read all the related documents carefully before investing. Please read the Risk Disclosure documents carefully before investing in Equity Shares, Derivatives, Mutual fund, and/or other instruments traded on the Stock Exchanges. As investments are subject to market risks and price fluctuation risk, there is no assurance or guarantee that the investment objectives shall be achieved. NBT do not guarantee any assured returns on any investments. Past performance of securities/instruments is not indicative of their future performance.
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