Gold ETF (Exchange-Traded Fund) is a commodity-based mutual fund that invests in gold. Such funds perform like individual stocks and represent gold both in paper and dematerialized form. Like all other ETFs, gold ETFs are traded on the stock exchange.
Best Gold ETFs to Buy in India in 2021
Here is the list of best gold ETFs in India that you may consider investing in:
|Gold ETF Names||Features|
|Quantum Gold Fund||Annualized 5 years return: 8.28% as on 20th Oct 2021|
Net Asset Value (NAV): Rs. 20499.77 as on 20th Oct 2021
AUM: Rs. 130.27 crores as on 30th Sept 2021
Expense Ratio: .78%
|SBI Exchange Traded Fund Gold||Annualized 5 years return: 8.37% as on 20th Oct 2021|
NAV: Rs. 4237.84 as on 20th Oct 2021
AUM: Rs. 2,340.25 crores as on 30th Sept 2021
Expense Ratio: .54%
|IDBI Gold Exchange Traded Fund||Annualized 5 years return: 8.68% as on 20th Oct 2021|
NAV: Rs. 4,387.09 as on 20th Oct 2021
AUM: Rs. 82.21 crores as on 30th Sept 2021
Expense Ratio: .35%
|Axis Gold ETF||Annualized 5 years return: 7.92% as on 20th Oct 2021|
NAV: Rs. 41.19 as on 20th Oct 2021
AUM: Rs. 490.13 crores as on 30th Sept 2021
Expense Ratio: .53%
|Nippon India Gold Savings Fund||Annualized 5 years return: 8.23% as on 20th Oct 2021|
NAV: Rs. 19.92 as on 20th Oct 2021
AUM: Rs. 1362.34 crores as on 30th Sept 2021
Expense Ratio: .1%
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Purpose of Gold Exchange-Traded Funds
Gold ETFs can serve as a suitable investment tool if you’re looking to diversify your financial portfolio. By investing in these funds, you will get exposure to sectors like – manufacturing, gold mining, transport industry, and others. Also, they offer you one of the easiest ways to invest in the gold industry.
You can also utilise such funds as a hedge against investment risks in fluctuating markets. Thus, gold ETF investment is an alternative to insurance in your investment portfolio.
Benefits of Gold ETFs
Following are the benefits of gold exchange-traded funds.
- Offers high liquidity
- Such funds are cost-effective
- Units of ETFs can be traded easily
- No entry or exit load is applicable
- Securer option than physical gold as there’s no possibility of theft
Taxation in Gold ETFs
Gold exchange-traded funds fall under the paper gold investment category. The tax norms in the case of such investments are as follows:
For short-term capital gains
If investors choose to redeem their ETF units within 3 years from the date of purchase, they’ll earn short-term capital gains (STCG). The returns earned upon sale of the units are taxed as per the income tax slab rate that is applicable for the individual.
For long-term capital gains
In case individuals choose to sell their ETF units after 3 years, they’ll earn long-term capital gains (LTCG). A tax rate of 20% is applicable on such gains. Also, investors are eligible for indexation benefits in the case of LTCG.
Also Read: Taxation In Mutual Funds
Who Should Invest in Gold ETFs?
If you are looking to diversify your financial portfolio, then you can consider investing in gold ETFs. The invested money goes towards standard gold bullion of 99.5% purity. Such funds are a low-risk investment even though they are traded on stock exchanges.
Also, if you wish to avoid paying storage costs for physical gold, then gold ETF mutual funds are a suitable option for you.
Gold ETF Investment Process
Please find the process below.
- First, open a DEMAT account. For that, you need to submit ID proof, PAN, and residential proof.
- Now, choose your gold exchange-traded fund and purchase its units.
- Finally, after purchasing, you will receive a confirmation via email or text on your phone.
Things to Remember Before Investing in Gold ETFs
Below mentioned are a few pointers to take into account before investing in such funds.
- Before investing, check the expense ratio of any particular fund.
- Do not go for any particular fund blindly on the lower expense ratio. Also check the experience and performance of a fund manager.
- Also, you must check the performance of a specific fund over the past years.
Gold ETFs offer a range of benefits, as mentioned above. In case you have a short or long-term investment plan in your mind, think beyond gold bars, coins and ornaments. Make an investment in the best gold exchange-traded funds and earn decent low-risk returns even in a volatile financial market.
Frequently Asked Questions
Is there a lock-in period for gold ETFs?
Gold ETFs do not come with a lock-in period.
Is gold ETF better than physical gold?
Gold ETFs are a perfect alternative to physical gold as these funds are backed by gold with a purity of 99.5%. That said, the purity of physical gold may or may not be that high. Also, note that no wealth tax is applicable on gold ETFs.
Can I exchange Gold ETFs for physical gold?
Yes, you can, if you keep gold equivalent to 1 kg in ETFs or multiples thereof.
Do I need to pay brokerage for gold ETFs?
Yes, you need to pay brokerage for gold ETFs.
How can I invest in Gold ETFs?
To invest in exchange-traded funds, you need to open a DEMAT account with a stockbroker.
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