Gold is the precious metal which has been popular as an asset since ancient times.People used to have Gold in the form of jewellery,ornaments or gold bars and now there is another option in the form of Gold ETF.The belief behind accumulating Gold has been its ever increasing value.So,people also use it as an investment option.The economic slowdown of recent years in the world markets again brought Gold into limelight and Gold prices have appreciated substantially over these years in the international markets.The investors in the stock markets pulled out their money out of stock and invested in Gold.Investment in Gold is considered rather safe than the markets and prices are also less volatile.
These properties of Gold has made people thinking of investing in Gold.But how to invest in Gold remains a million dollar question.You might be thinking that it is so simple,all you need is to go to a jewellery shop or a bank and buy jewellery or gold bars.Of course you can do that.But then question arises is how to keep it safely.It is not a good decision to keep it at home as there is a risk of burglary or theft.You can opt for bank lockers but then there are bank charges and other formalities of having a locker.
To avoid these apprehensions,the Gold ETFs have been launched by the exchanges.Gold ETFs or Exchange Traded Funds are just like Mutual Funds and are tradable on an exchange like mutual funds or stocks.These ETFs have a NAV or Net Asset Value which keeps fluctuating during trading hours.These NAVs are determined according to the prevalent Gold prices in the markets.There are different companies which provide option to invest in Gold via ETFs.You can keep them as long term investment or just trade in ETFs.They can bought or sold anytime during trading hours.You buy Units of ETFs which are kept in your account in electronic form.As we saw above,it is like mutual fund investment.
Advantages of Gold ETFs :-
1. Electronic form holding :- The Gold ETFs,being a Fund are held in electronic form or dematerialised form in your Demat account.So you don’t need to hold the Gold in physical form.You are taking the exposure of Gold investment even without holding it in physical form.
2. No burglary or theft risk :- As Gold is not there with you physically,the risk of loss due to burglary or theft is not there.
3; No making or breaking charges :- You don’t need to make or break your Gold jewellery again and again while buying or selling.So no extra expenses are there.
4. Option of SIP investment :- Gold prices being quite high,it may not be possible to invest in Gold in lump sum.Gold ETFs provide you with the flexibility of buying Gold systematically and regularly in the form of a Systematic Investment Plan (SIP).This also helps in prices getting averaged up and thus avoiding the Gold buying at peak prices.
5. Anytime buying or selling :-Gold ETFs offer you the provision of buying or selling your ETFs anytime during trading hours.
6.No risk of purity or duplicity :- Biggest risk while buying Gold in physical form remains of it originality.We look to get it checked from different sources to ascertain that the Gold we actually bought is not duplicate or impure.But with Gold ETFs,you are away from these fears.You are just buying units equivalent to market prices of Gold.
Looking at all these features of Gold ETFs,they make a good investment option.Gold Investment should constitute at least 10% of your total portfolio holdings of your investments.You can opt for Gold ETFs for this investment.