Learn how to invest in gold exchange-traded funds (ETFs) | Motilal Oswal

How to invest in gold exchange traded funds

Gold ETFs have been an essential financial investment in many portfolios. In essence, Gold Exchange-Traded Funds are units of gold that are issued. The ETF holds physical gold against it with a gold custodian bank. For over 10 years, gold ETFs have been in India. When you invest in gold ETFs, it is critical to remember that these are more profitable than other gold investments. This is mainly because you can make profits as the prices steadily increase by the day. 

  • Benefits of Gold ETFs

There are several benefits of investing in gold ETFs. Here are some of the key benefits.

1. Tax Benefits

One of the key benefits of gold ETFs is that you can experience tax benefits. When gold ETFs are older than a year, they attract tax on long-term capital gains. However, you will not be charged any VAT.

2. Hedge Against Inflation

Many investors consider gold to be a safe investment as it most often is protected against several inconsistencies. Some of the common inconsistencies in the market are inflation and other fluctuations in currency prices

3. Secure Investment

Compared to physical gold, gold ETFs are a much easier investment. They are also much more secure as there is no worry of theft, storage areas to be secured, and sustaining big losses. 

4. Open Trading

Prices of gold that are on the stock exchange can be viewed publicly. In addition, you also have the option to check the gold prices for the hour or the day without any hassle.

5. Easy Transactions

Unlike physical gold, you can complete the transaction of purchasing gold ETFs in a simple manner online through any stockbroker. While physical gold can also be purchased online, there can be several challenges with quality and others. 

  • Important Points to Remember

While investing in gold ETFs can be secure and rewarding, there are a few things that you should remember.

  • Buying or selling gold ETFs does not affect the AUM of the fund
  • You can buy or sell gold ETFs in exchanges just similar to that of any stock. All you need to have is an active Demat and trading account with a stockbroker.
  • Gold ETFs are typically pegged to the price of gold. In case the price of gold increases, then a similar increase in price can be observed with the gold ETF as well.
  • By investing in gold ETFs, you can diversify your portfolio.
  • When it comes to gold ETFs, you do not have to pay Securities Transaction Tax. This is because STT is imposed only on equity products and equity itself.

In Conclusion

Investing in gold ETFs not only helps you diversify your portfolio but also has several other benefits. Compared to the entire ETF space and industry, the Gold ETF category is very small. However, by investing in them you can aim to get stabilized returns over time. There are many types of gold ETFs available in the market. Before investing in one, it can be beneficial to research them beforehand and analyze which one of them would be a good fit for your investment portfolio

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