If there is one commodity in India whose value has been constantly on the rise, it has to be gold. There is something about this yellow metal that continues to enchant Indians even today. Gold has established its importance in the customs and traditions ages ago, but it is also loved by both men and women in the form of jewellery and ornaments. Apart from this, gold is considered as a smart investment option as well.
Indians love purchasing gold in almost any form; solid gold biscuits, gold in the form of jewellery, but now they have an even smarter option for possessing gold. Gold lovers can now also purchase gold in the form of gold exchange-traded funds or gold ETF.
If you wish to find out more about gold exchange-traded funds, continue reading.
What are Gold ETFs?
Gold ETF (Exchange Traded Fund) is just like any other company stocks which can be traded at the stock exchange. The objective of a gold ETF is to track the price of physical gold as its underlying index, with minimal errors. Gold enthusiasts/investors can purchase Gold ETFs close to the actual price of the gold. Of its total assets, a gold ETF invests a minimum of 95 percent in securities of a particular index (which is being replicated or tracked).
Everything you need to know about Gold ETFs
Gold exchange-traded funds available in electronic form: Gold ETFs rare stored in the investor’s online Demat account. Hence, there is zero threat of putting your gold ETFs at risk. This might not be the case with physical gold and its security is always at stake. This is the reason why gold owners usually rent a safety vault in a bank where they can safely keep their gold. But this comes at a cost, and one must pay the annual fees for renting a safety vault. Hence, buying gold ETF makes a lot more sense in today’s times.
The purity of gold ETFs is at par with international standards: Gold ETFs are supposed to invest in gold securities and physical gold that meet internationally hallmarked gold standards. This category of gold is usually considered to be at least 99.5 percent pure. Hence as a gold ETF owner, you do not have to fear the authenticity of gold that you own in electronic format, unlike purchasing physical gold where sometimes, the value of your investment might not live up to its standards.
Gold ETF investments offer liquidity: Gold ETFs can be ideal if one wants to add them to diversify his / her investment portfolio and give the folio some investment. One good thing about gold ETFs is that they do not have a mandatory lock-in period. No lock-in means one need not stay committed to their gold ETFs and can redeem or withdraw their funds on any working/business day. It is always better to have some investment which you can quickly liquidate during emergencies, and gold ETFs can be that investment.
How to pick the right Gold ETF?
Remember that there are several gold ETF products available in the market, but you should invest in only that fund that has a proven track record. Another thing one needs to keep in mind is that the gold ETF they are investing in belongs to a reputed fund house. This way, they would not have to worry about its authenticity. Also, if you are investing in gold ETFs, make sure that you have a long term investment horizon. That’s because gold ETF investments need some time to grow and hence, it is better that you remain invested in them for at least three to five years if you want to stand a chance of making some capital gains.
These were some of the things about gold ETFs that one should know if they are considering it as an investment option. But before going ahead with any investment decision, it is better that you understand your risk appetite and invest in such a way that you can achieve your financial goal.