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Understanding Gold ETFs

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We Indians have a special love for gold. None of us can actually deny that statement. We have been buying gold in various forms of ornaments for decades. Most of us have realized it is a wonderful form of investment even before the first gold Exchange Transfer Fund was started in the year 2007. 

This post will help us understand the concept of the gold Exchange Transfer Fund in detail. These open-ended mutual fund schemes are based on the ever-changing price of gold. The physical unit of gold does not generate income on its own. Moreover, the making charges and additional charges make it a costly purchase. In this scheme, one unit of the ETF is equal to 1gm of gold. 

Investors get a dual benefit of stock trading as well as investing in gold. If the price of gold increases, the worth of your share increases and vice versa! As an investor, trying to diversify your portfolio, going for gold ETF is a good idea. This will expose you to gold markets and give you a chance to learn more about the changing trends and the impact of one market on another. 

The money invested will go towards standard gold bullion of 99.5% purity, which means that investing in gold is comparatively less risky. The following can be said as the benefits of investing in the gold Exchange Transfer Fund. 

  • Flexibility
    • Gold Exchange Transfer Funds can be purchased online and placed in the DEMAT accounts. The asset management companies manage them like stock exchange, so it is easy to buy and sell.
  • Easy transactions
    • Investors use platforms like NSE (National Stock Exchange) to trade in gold markets. The platform is safe and transparent. Also, gold ETFs can be used as security for loans.
  • Liquidity
    • Trades on exchange offer high liquidity and gold ETFs are no exception. Selling during the festive season when the prices soar high will result in good returns.
  • Smaller denominations
    • Investors can start small with gold ETFs. The same cannot be said when purchasing from retailers.
  • Tax-efficiency
    • Wealth tax is not levied on gold ETFs. And storing gold in the Demat format is safer than storing the physical pieces.
  • Cost-effective
    • No making charges, ability to purchase at international rates, no designing, etc. make gold ETFs a better option when compared to the physical form of gold.

Investing in gold ETF is simple and easy. Just follow the below steps to get into the gold market.

  1. Open a Demat account to start trading. Identity proof such as PAN and residential proof need to be submitted to open the account.
  2. Select gold Exchange Transfer Fund. Or, opt for the mutual funds with underlying gold ETFs.
  3. Get confirmation of your order via email or phone number.
  4. The brokerage fee with be deducted during the transactions. Study the markets, buy and sell accordingly.

Though it seems very lucrative, Gold markets are also prone to risk so stay alert.