Akshaya Tritiya 2018: Even as investors may be mulling various options to invest in gold this Akshaya Tritiya, Gold ETF may turn out to be a good choice for investors given low buying limit, high liquidity and storage benefits. Notably, a Gold ETF (exchange traded fund) closely tracks the prices of physical gold, and the returns nearly mimic the prices of physical gold, and is also traded on the exchanges. We take a closer look at Gold ETF.
What is a gold ETF?
A gold ETF is an exchange-traded fund (ETF) which aims to closely track the domestic physical gold price. Notably, Gold ETFs are units which represent ownership in physical gold which may in demat form.
Benefits of gold ETF
As investors hold these in a demat form, storage costs are much lower compared to physical gold. Investors also hedge against issues relating to purity, which is a major concern in case of physical gold investments. Thirdly, for physical gold, the minimum investment can be substantial in case of jewellery or even a 10 gram biscuit. In case of a gold ETF, the minimum investment is typically Rs 5,000, with minimum additional investment of Rs 1,000. As these are exchange traded, investors can buy units of ETFs using their demat account. This also provides advantage to the investors as they receive near wholesale price for buying and selling even one unit compared to huge premium for buying small amounts and physical gold. Further, investors may be able to exit their positions more easily. Notably, their pricing is transparent and are and their purity is guaranteed by the asset management company.
A few popular fund names and performance
While physical gold has returned about 6.35% in the year so far, a few gold ETFs such as Aditya Birla Sun Life Gold ETF, Axis Gold ETF Fund, Canara Robeco Gold ETF fund have closely mimicked the rise with returns of 5.95%, 5.92%, 7% respectively.