Gold Exchange Traded Funds fare better than the physical yellow metal

Like shares, for investing in Gold ETFs, one should have a demat account and are bought and sold through stock exchange.
Image used for representational purpose only. (File photo | Reuters)
Image used for representational purpose only. (File photo | Reuters)

HYDERABAD: Indians are known for their love for gold, a reason why Gold Exchange Traded Funds (ETFs) are one of the best alternative investment options for them.Not just from an investment point of view, but even traditionally, gold has been integral to Indians’ lives for generations, making it a must-have property. This inclination towards the yellow metal has made India one of the top consumers of gold and one of the nations with large gold reserves.

However, one thing many financial analysts rue is that gold is owned and stored by Indians in jewellery form, as a possession rather than as an investment, thus making it mostly ineffective in personal finance planning. In this backdrop, Gold ETFs are seen as an answer to address this drawback.

“In simple terms, Gold ETFs are nothing but buying a material like gold in dematerialised form, like one buys shares. By investing in ETFs, one cannot physically possess gold but can own it in demat format and use it as an investment option. Like physical gold, gold ETFs can be bought or sold at any time at the price prevailing at that point of time, thus offering liquidity. While physical gold — since most Indians own it as jewellery — also involves a lot of wastage and other charges, Gold ETFs do not have any such costs and act purely as an investment,” explained Hanu Yedluri, financial adviser and CEO of fintech company InstaEMI.com.

Like shares, for investing in Gold ETFs, one should have a demat account and are bought and sold through stock exchange. Generally, one gram of gold is considered as one unit of Gold ETF. The Gold ETFs are purchased at the same rate as the gold price at that time. Also, with all the leading stock broking platforms offering options to invest in Gold ETFs, one can invest in them right from one’s mobile phone or laptop and monitor it themselves.   

While some financial analysts opine that the rate invested in Gold ETFs are better than when buying physical gold, there are also several others who ask investors to think twice before investing in ETFs.“Two main reasons Indians have been investing in gold are (i) for its traditional importance among Indian families and (ii) it acts as a hedge against inflation. Though gold acts as a saviour in times of emergencies, it definitely cannot give better returns than other options like investing in real estate, equities or MFs.

As an investment product, even Gold ETFs also respond the same way as physical gold. Therefore, one need to carefully assess their overall portfolio and decide whether they need to invest in Gold ETFs or not,” suggested Subba Rao Anupindi, financial adviser.

Several analysts Express spoke to stressed that a small percentage of investment in Gold ETFs is advisable as it brings diversification to one’s portfolio, but it should be done only after investing in other investment avenues that are more important to an individual’s life and give higher returns.

Related Stories

No stories found.
The New Indian Express
www.newindianexpress.com