By Viek Bajaj, Cofounder StockEdge & Elearnmarkets

The custom of purchasing gold on auspicious occasions has long been a part of Indian culture. This Diwali also, Indian households will be out in force to make festive gold purchases.

The demand for and popularity of gold ETFs among investors has grown significantly over time. While Indians have faith in gold investments, owning it in the form of jewellery, gold coins, or bars comes at a high cost.

As a substitute, owning it in the form of paper gold, which is available at a price nearly equal to the actual price of gold, achieves the same investment goals.

India allows the trading of gold ETFs on the National Stock Exchange, as well as other leading global stock exchanges, in the same way that it allows the trading of other equity stocks of companies. This means that gold ETFs can be traded easily and continuously at market prices.

Let us discuss more about Gold ETFs and buying gold this Diwali season:

What are Exchange Traded Funds?

Unlike traditional mutual funds, an ETF, or Exchange Traded Fund, is an investment fund that is primarily traded on a stock exchange. These funds operate primarily as stocks and are known to invest in assets such as stocks, commodities, or bonds.

What is a Gold ETF?

Gold ETFs are passively managed investment funds that invest in and track gold prices. It is a simple investment product that combines the ease of gold investment with the flexibility of stock investment.

It is traded on major stock exchanges such as Mumbai, London, New York, and Zurich, among others. These ETFs, like any other stock, trade on the National Stock Exchange’s cash market and can be bought and sold at market prices.

Gold BeEs are an open-ended passively managed Exchange Traded Fund (ETF) that closely corresponds to the returns provided by the domestic gold price.

Why should you invest in Gold ETF this Diwali?

Gold ETFs are ideal investment options for investors who want to invest in gold but are hampered by storage issues or are uncertain about the purity of physical gold.

Below are the reasons why you should invest in Gold ETF this Diwali:

  • Investors who are willing to commit their funds for at least 3-5 years should consider investing in Gold ETFs.
  • If you want to bet on the rising value of gold in the future, Gold ETFs are the way to go.
  • If you want to invest in gold without incurring any additional costs such as commissions, etc., gold ETFs or paper gold will meet your needs if your investment is substantial.
  • You can invest in Gold ETFs even if you don’t have a lot of money because you can buy as little as one unit, which is equal to one gram of pure gold.
  • If you want to invest in gold without incurring any additional costs such as commissions, etc., gold ETFs or paper gold will meet your needs if your investment is substantial.

How can one invest in Gold ETF in India?

A Demat Account is required in order to invest in Gold ETFs. To open an account, the following documents must be provided:

  • PAN Card, Address Verification (Adhaar card, etc.)
  • Identity Verification (Voter ID, etc.)

After you’ve established your account, you can choose which Gold ETF to invest in and place an order. Following this, you will receive an email confirmation of your purchase to the email address you provided. It should be noted that the fund house or broker will charge a small fee when buying or selling the ETF (if any).

Bottomline

When investing in gold ETFs, an investor can choose between investing through systematic investment plans (SIPs) and investing in a lump sum. While doing so, there is no need to be concerned about purity, storage issues, or anything else. So, this Diwali, add a little sparkle to your investment portfolio by investing in a gold ETF.

Happy Dhanteras!