Investment School: What are Gold ETFs?

What are Gold ETFs?

As a country, India is the largest consumer of gold and Indians value gold very high than anyone else in the world. In the past few years, apart from physical gold, other channels of gold investment have opened up. One of the most interesting option is Gold ETF. So what are GOLD ETF?

Gold ETFs are mutual funds which listed and traded in the stock market.All you need is a demat account to buy and sell Gold ETFs. The advantages of ETF as explained in the previous article holds good for Gold ETF too.

While investing in Gold ETF, take into account the following information.

1. Avoid buying Gold ETF funds during the NFO. The reason is during NFO Gold ETF charge 1.5-2.5% as entry load. However when these Gold ETFs are listed in the stock market, you can buy them without entry load but with a marginal brokerage of 0.2-0.5%.

2. Check the expense ratio of Gold ETFs. Currently they are in the range of around 1% for most Gold ETFs.

3. Gold ETFs cost includes cost of annual fees for demat account and online trading account. Remember you need demat and trading account to operate in Exchange Traded Funds.

What should investors do?

Though Gold ETFs reduces the risk of holding gold in physical format, you should take into account the cost(Expense ratio,brokerate,annual fees for trading and demat account) of holding a Gold ETF. After considering both scenarios, make your investment call.

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1 comment:

somnath said...

It was a nice one, I think if u mention amount of return from gold etf n also tell abt factors driving gold prices up/high the whole article would bcom more meaningful

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