Gold ETF : Safeguard Your Money With Paper Gold

Gold has a special position in the Indian traditions. Whether it may be marriage or any other auspicious occasion gold in the form of ornament, coins, sacred idols are used. It shows the sentimental attachment of people with this precious metal. Apart from the nostalgic attachment to gold, there is also an economic value of the metal. Gold is termed as one of the most precious metals and thus costs accordingly. It is also an important factor in controlling the situations of inflation and deflation as well. There is a certain amount of gold that is required to be kept as a reserve by the government in case of any exigency arrives. Hence, one can conclude that gold comparatively renders more profits than any other traded commodity. 

After the great financial crisis of 2008, investors drifted towards investing in the precious metals considering them to be safe than the stocks. Gold was the most preferred metal for investment by the clients. Thus, the Asset Management Companies understood the requirement and thereby launched a category of mutual funds known as the Gold ETF (Equity Traded Fund). Gold ETF is a type of mutual fund which invests in the companies that produce gold. The units of this scheme are traded in the stock market as shares of other companies. The clients get units of gold which are on papers. They do not get physical gold which releases the tautness of storing and safeguarding the physical gold. The first Gold ETF in India was launched in 2007. With the commencement of this scheme, it became quite easy for the investors to invest in gold along with getting the ease of investing according to their cost-effectiveness. 

The scheme finds its origin in Canada. Commenced in the year 1961 it was a close-ended fund back then. But, now it has experienced a revamp by being transformed from a close-ended fund to an open-ended one. Gold ETF invests in gold bullion and its latent assets. Gold bullion is the companies which produce gold.  Gold ETF is a scheme that allows the clients to avail an opportunity of owning gold equivalent to their investment amount. 

In this scheme, the clients do not get the gold physically in the form of bars or coins. Hence, this plan is termed as paper gold. 

Gold ETFs have a highly liquid nature. Clients can buy and sell the units of this fund within the click of a mouse. As discussed earlier, the units of gold ETF are traded in the equity market and the clients are free to deal at any time during the trading hours of the market. There is no discrepancy in the price of Gold ETF as it is equivalent to the price of 1 gram of gold which maintains total transparency in pricing. Unlike, jewellery or physical gold, the Gold ETF fund does not include any making charges or premium. Investors are required to pay only the brokerage of 0.5%. Gold ETFs are tax efficient as the profits from the scheme are considered as long-term capital gains if the client holds the investment for a period of more than one year. But, the physical gold investments are not considered as long-term capital gains before completion of a three-year period. Along with being tax-efficient, Gold ETFs does not include any wealth tax which is otherwise levied on other investments. It is an appropriate method of investing in gold as it can be traded in meager denominations of 1 gram (500 mg by some companies). This means that every unit of the Gold ETF scheme is equivalent to one gram of gold. It seems to be impractical to buy physical gold in such a small quantity. Gold ETFs are more safe and advantageous as compared to gold coins and jewellery because the units are not required to be secured. There is no fear of form loss theft or misplacing. Gold in other forms is required to be shielded in a locker in order to protect it. The purity of gold in this fund is equivalent to 99.5% pure gold bullion. Hence, the client need not worry about the purity of gold which is assured by the valuers appointed on behalf of the clients. Gold ETFs can be easily converted into physical gold at the point when a client’s holding in units becomes equal to one kilogram of gold. 

Thus, invest in Gold ETFs and wave a goodbye to all your tautness related to gold investments. The clients can now easily make the best use of their money without getting involved in the task of securing the physical gold.