Indians love gold and consider it a safe haven asset. Currently gold is at a two year high, priced at ~INR 33,300/10g
One way of investing in gold is through Gold ETFs (Exchange-traded funds).
What is a Gold ETF?
A Gold ETF is a commodity ETF that consist of only one principal asset – gold. This fund holds gold derivative contracts that are backed by gold. So if you invest in a Gold ETF, you won’t own any physical gold, but the value of your investment will track the price of gold.
What are the advantages of Gold ETFs?
- Gold ETFs do not have any associated wealth tax, only short and long term capital gain taxes are applicable.
- You can buy and sell Gold ETFs through your brokerage account. They do not have any storage costs.
- Transaction costs for Gold ETFs are low (0.5% – 1%), compared to transaction costs of physical gold (5% – 7%)
Table below shows Top 5 Gold ETFs:
| Name of the fund | 1 Year return | 3 Year return | 5 year return | 10 year return |
| IDBI Gold Exchange Traded Fund
|
7.13% | 4.60% | 1.30% | – |
| UTI Gold Exchange Traded Fund
|
6.78% | 4.37% | 1.13% | 8.58% |
| Axis Gold ETF Fund
|
6.66% | 3.18% | 0.46% | – |
| Kotak Gold ETF Fund
|
6.58% | 4.07% | 0.93% | 8.46% |
| Quantum Gold Fund
|
6.54% | 4.07% | 0.99% | 8.50% |
Source: Value Research, 18th October, 2018
| NIFTY 50 | 2.17% | 8.25% | 11.39% | 12.31% |
Source: Value Research, 18th October, 2018
Gold has not performed as well as the equity markets over the last 10 years, but it can be used to diversify your portfolio. You can invest upto 5% of your portfolio in Gold ETFs.
