A majority of people are looking to invest in gold as gold prices have dropped nearly 25 per cent from an all-time high of Rs 55,922 per 10 grams.
As an investment option also, gold acts as an effective diversifier, taking the edge off losses during economic downturns and tough market conditions. Experts say this investment option operates as a strategic asset proving its effectiveness in investors’ portfolios. Hence, experts suggest gold as an integral part of one’s portfolio, even though gold prices have dropped 25 per cent from an all-time high.
In the last few years, with Sovereign Gold Bonds (SGBs) the government has been promoting financial investment into gold. Gold ETFs, along with that, has also been gaining popularity among investors as another investment option.
Industry experts say Gold ETFs work for investors who want high liquidity from their gold investment. Gold ETFs can be bought by maintaining a Demat account, wherein investors also get the option to invest in them as SIPs.
Note that gold investment in Sovereign gold bonds comes with the interest component besides capital appreciation and other benefits. On the other hand, similar to physical gold – gold ETFs offers longer tenure with a good return and high liquidity.
Additionally, experts say investors should not just consider the expense ratio of the Gold ETF while investing. Also factor in the fund size so that you are offered good liquidity.
To invest in gold ETFs investors will not have to place several bids for investing in it. Gold ETFs should be purchased at the market price. Also, keep in mind that as an investor you should maintain an overall allocation of 15 per cent of your portfolio into gold.
Note that these ETFs attracts short term capital gains tax if held for less than 3 years. To get the best of these gold ETFs experts suggest investors should hold them for at least a period of 3 years and more.
At the same time, long term capital gains tax is added on these investments if held for a period of over 3 years, unlike Sovereign gold bonds wherein proceeds from the investment does not attract capital gains tax liability on it if held until maturity (8 years term).
