In place of buying physical gold, you could buy Gold ETFs, which offer more advantages than physical gold. They are easy to sell, they are held in electronic form and there's no question of theft. Also, there's no need to invest in a locker and it tracks gold prices...so returns are like gold. Here are 5 gold ETF's/Funds that you could consider. We recommend buying Gold ETFs, only if you want to diversify. Gold prices which had slumped this year have recovered, though returns have been modest.
SBI Gold ETF
SBI Gold ETF is one of the top gold ETFs in India with substantial assets under management. The fund tracks gold prices and has generated a returns of 0.3 per cent in the last one year.
This is one gold ETF that is well managed and has the potential to generate returns. Excellent hedge against inflation and extremely liquid. Go for it with a long term perspective in mind.
Now remember that gold ETFs are taxed in a similar manner as gold. So, unlike equity shares, long term capital gains applies on Gold ETFs.
IDBI Gold ETF
IDBI Gold Exchange Traded Fund is an open ended gold exchange traded scheme which tracks the price of gold in the domestic market.
Each unit of IDBI Gold ETF is backed by 24 carat gold of 99.5% purity and will be held by a custodian. The Fund has generated a return of 1.2 per cent in the last one year, thanks to a recovery in the prices of gold that we have seen.
As mentioned earlier, should gold prices rally they have the potential to gain. The one advantage for buyers is that they are getting the ETF at prices which are much lower than they were a year back.
Kotak Gold ETF
Kotak Gold ETF is an open-ended Exchange Traded Fund, which invests in physical gold and endeavors to track the domestic spot price of gold as closely as possible. Thus it provides an option to invest in gold without taking physical delivery of gold. Each unit of the KGETF is approximately equal to 1 gram of gold.
The one year returns from the ETF has been 0.3 per cent, which is not the best. The one reason that we believe that gold ETFs could be good is because prices can recover and they are a good hedge.
Axis Gold ETFs
Axis Gold ETFs will allow you gold purity of 99.5% at prevailing market prices without premium charges. An excellent hedge against inflation.
The fund has generated a return of negative 2.2 per cent in the last one year. Again, we are recommending this ETF is because you are getting it at rock bottom prices. Buy the ETF if you believe that gold prices would rally in the next one year or so.
What are gold etfs?
Gold ETFs have gained a lot of importance over the last decade. Gold Exchange Traded Funds first began in Australia in 2003 when the Gold Bullion Security started. Since then many countries including India have launched Gold ETFs. The first Gold ETFs in India was initiated in February 2007. A Gold ETFs is an instrument that is based on gold price or invests in gold bullion. It is traded on major stock exchanges, and Gold ETFs track the gold bullion performance.
When the gold price moves up, the value of the exchange traded fund also rises, and when the gold price goes down, the ETFs loses its value. Investors can buy gold ETFs online and keep it in their demat Account. An investor can purchase and sell gold ETFs on the stock exchange.
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