Gold has seen a very bullish trend in the last few years. In fact, we have seen gold rally dramatically, as investors have sought a hedge against other risky investments. Here are 7 gold investments, which have seen a stupendous rally in the last 1-year. Remember, to read the bottom of the article, where we have described in detail, why you should invest in Gold ETFs, in place of gold jewellery and gold bars.
1. SBI Gold ETF
This investment has given a solid return of 22.56 per cent in the last one year. Those who invested around Rs 1 lakh in the SBI Gold ETF, are now sitting on Rs 1.25 lakhs value of SBI gold ETF.
Gold ETFs, are traded on the stock exchanges and can be easily bought just like shares. So, just as you place an order for shares, so you can place an order for the SBI Gold ETFs. These are highly liquid and can be sold in the same manner, you sell shares. Brokerages and other charges are also the same like equity shares. So, it has numerous advantages over buying physical gold.
2. Invesco India Gold ETFs
Invesco India Gold ETF has generated a return slightly in excess of 22 per cent. This is again a good Gold ETF to have in your portfolio. Remember, gold ETFs are a far superior investment as compared to gold jewellery and gold bars, which makes them an attractive investment.
Again, as long as the world is flush with monetary easing money, as is the case now, we would continue to see investments pour into all asset classes, including gold, bonds and equity shares. Normally, gold and equities move in different directions, this year, however they have moved in the same direction. That trend could change if there is an economic slowdown, in which case, we would see gold moving higher and equities moving lower.
3. Axis Gold ETF
Among all the gold ETFs, Axis Gold ETF has been the top performer, with returns of 22.60 per cent in the last one year. This kind of returns probably beats any asset class, including equity shares by a distance.
Gold ETFs, track physical gold and hence the prices are almost the same. Since these are traded in the electronic form, there is no concern of theft and storage worries as well. For those looking to diversify their portfolio a gold ETF like Axis Gold ETF is a good bet.
4. Invesco India Gold Exchange Traded Fund
If you thought only equities can generate returns, you maybe mistaken. A Fund like Invesco India Gold Exchange Traded Fund has generated returns of 22.45 per cent in the last one year. An investment of around 10 per cent in gold, is highly advisable to diversify your portfolio. Should there be a sudden collapse in shares or FD interest rates fall, it would protect you against losses. Most investors recommend at least partial diversification in gold.
5. Aditya Birla Sun Life Gold ETF
With a return of 22.17 per cent, Aditya Birla Sun Life Gold ETF has been a pretty decent performer in the last 1 year. It is likely that the fund would continue to do well, given the sudden buoyancy that we are seeing in gold. It is important to remember that there are geo-political risks like the Iran-US tensions. Gold is considered a safe haven asset and a good hedge against such risks. This is why many investors advocate buying into gold ETFs as a part of the portfolio.
6. IDBI Gold Exchange Traded Fund
Most of these funds tend to perform almost similar like each other, as all of them invest in gold, which tracks gold prices. This IDBI Gold Exchange Traded Fund has generated a return of near 22 per cent in the last one year. Gold is unlikely to fall quickly and given the easy monetary conditions around the globe, the chances of it fading is very little. While most analysts remain bullish on gold, one must not forget that this year, the run-up in gold has been too fast and there could be a long period of consolidation and a low returns phase as well.
7. ICICI Prudential Gold ETF
This is another ETF that has generated close to 7 per cent returns in the last 1 year. ICICI Prudential Gold ETF like all others ETFs is an open ended scheme and can be bought and sold through the exchanges. Like equity shares, one can start an SIP in gold ETFs as well, which in the last one year would have generated good returns. However, invest only if you have a lond-term perspective in mind and are willing to take risk.
Why Gold ETFs are better than gold jewellery and gold bars?
1) Making charges
Gold jewellery may attract a making charge of 10 to 20 per cent, which increases the cost of gold. You cannot recover that cost when you sell. On the other hand, mark-up charges by banks on gold bars could be 10 to 20 per cent, while Gold ETFs attract a brokerage of 0.5 per cent or less.
On selecting gold jewellery, you cannot recover the making charges. On the other hand banks do not buy your gold bars and coins, while selling a gold ETF would cost only 0.50 per cent, as brokerage or even less to sell.
Physical gold can easily be stolen, while Gold ETFs cannot. Apart from this, you may need to polish the gold, hire a bank locker etc. In short, there are maintenance charges for gold, while no such hassles in the case of Gold Exchange Traded Funds.
All in all, gold exchange traded funds are far attractive than other investments, which makes buying them an attractive proposition. However, one cannot guarantee returns in any form of investments and those risks will always remain.
About the author
Sunil Fernandes has spent 25 years covering business and finance with leading investment magazines and newspapers. He has also covered commodities like gold, crude oil etc. His passion remains stocks and equity research.