Gold is one of the oldest and most trusted forms of investment in India. It is considered a safe haven asset that can hedge against inflation, currency fluctuations, and geopolitical risks. However, buying physical gold comes with its own challenges, such as storage costs, purity issues, theft risks, and liquidity constraints. That’s why many investors prefer to invest in gold through exchange-traded funds (ETFs).
Gold ETFs are funds that track the price of physical gold in the local market. They invest in gold bullion, which is gold that is 99.50% pure. They offer the benefits of owning gold without the hassles of holding it. You can buy and sell gold ETFs on the stock exchange, like any other company stock, at market prices. You can also diversify your portfolio with gold ETFs, as they have low correlation with other asset classes.
Here are some of the advantages of investing in gold ETFs:
- Convenience: You can buy and sell gold ETFs online through your demat account and trading platform. You don’t need to worry about delivery, storage, or verification of physical gold.
- Cost-effectiveness: You can save on the making charges, premiums, and taxes that are associated with buying physical gold. You also don’t have to pay any entry or exit load when investing in gold ETFs.
- Transparency: You can track the performance of gold ETFs on the NSE website or other financial portals. The NAV of gold ETFs reflects the current market price of gold, minus the fund expenses.
- Taxation: You can enjoy long-term capital gains tax benefits if you hold gold ETFs for more than three years. The long-term capital gains tax rate for gold ETFs is 20% with indexation benefit, which means you can adjust the cost of acquisition according to inflation. This reduces your tax liability compared to physical gold, which is taxed at 20% without indexation benefit.
How to invest in gold ETFs in India?
To invest in gold ETFs in India, you need to follow these steps:
- Open a demat account and a trading account with a broker or a bank that offers online trading facilities.
- Choose a gold ETF that suits your investment objective and risk appetite. You can compare the performance, expense ratio, tracking error, and liquidity of different gold ETFs on various websites or platforms.
- Place an order to buy or sell gold ETF units on the stock exchange. You can buy or sell as little as one unit of gold ETF, which is equivalent to one gram of gold.
- Pay or receive the amount for your transaction through your trading account. The units will be credited or debited from your demat account accordingly.
Some of the best gold ETFs in India that you can consider investing in are:
- Nippon India Gold ETF
- HDFC Gold ETF
- SBI Gold ETF
- ICICI Prudential Gold ETF
- Kotak Gold ETF
Please note:
- GrowWiseis not registered with the Securities and Exchange Board of India (SEBI) as an investment advisor, research analyst, or portfolio manager.
- The information published on this blog is presented for educational purposes only and should not be construed as financial advice.
- We strongly recommend that you seek the advice of a qualified financial advisor before making any investment decisions.
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