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How To Buy Gold ETF?

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September 21, 2022
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An exchange-traded fund (ETF) is where you can hold a collection of shares or options, which is listed on a stock market like the National Stock Exchange of India (NSE) or the BSE (formerly known as the Bombay Stock Exchange).

Investors can purchase and sell ETFs in the same manner as shares by using the codes assigned to them by the Indian Stock Exchange. You can simply build a diversified portfolio by investing in ETFs and distributing your money across a variety of asset classes, such as Indian and international shares, fixed income, debt, foreign currencies, commodities, and metals. Due to the increase in index fund investing and the ability to purchase numerous shares in a single transaction, ETFs have gained popularity in India over the past few years.

What Are Gold ETFs in India?

Gold ETFs are exchange-traded funds that let you invest in gold and gold-related assets. You have exposure to the gold price, mining businesses, or even other gold-related assets thanks to the ETF's connected assets. There are several kinds of gold ETFs, such as:

  • Gold miners ETF: ETFs that invest in gold mining firms typically include equity in these companies. This might be useful if you wish to invest in a range of gold sources. Since ETFs don't represent ownership in the underlying assets, you don't truly hold shares in the company. 
  • Gold price ETF: Some ETFs track the price of gold bullion.  Although you may invest in an ETF that tracks the price of gold, you don't really own the bullion. In this manner, you gain when the price of gold increases. One of these gold ETFs might help you profit if you believe the price of gold will rise.
  • Leveraged gold ETF: This kind of ETF really aims to outperform the underlying assets in the ETF. While most ETFs follow a 1:1 ratio as far as performance is concerned, these ETFs aim to increase the performance ratio to 2:1 or even 3:1. Options can occasionally be used to achieve this.

Although there are more varieties of gold ETFs, these are the three that you're most likely to encounter.

How to invest in Gold ETFs in India? 

Gold ETF is comparable to shares of a corporation that can be purchased on the stock market. You can request that your broker acts as your agent when buying or selling something. Online self-help is another option. To buy and sell gold ETFs, all you need is a trading and Demat account. Purchasing ETFs is easy if you are already buying and selling equities.

Here’s how to buy gold ETF online- 

  • Register into your account.
  • Look through the available Gold ETFs and select the one you wish to purchase.
  • Set up an order
  • Authorize payment using the bank account you have linked.
  • Your Demat account is credited with the gold ETF units.

 

List of gold ETFs

The National Stock Exchange of India (NSE) and the BSE (formerly the Bombay Stock Exchange) both list and trade the following gold ETFs:

  • Aditya Birla Sun Life Gold ETF
  • Axis Gold ETF
  • HDFC Gold ETF
  • ICICI Prudential Gold ETF
  • IDBI Gold ETF
  • Invesco India Gold ETF
  • Kotak Gold ETF
  • Nippon India ETF Gold BeES
  • Quantum Gold Fund ETF
  • SBI Gold ETF
  • UTI Gold ETF

You must focus on global marketplaces like the US market if you want to expose yourself to other widely used gold ETFs worldwide. Please be aware that a brokerage account with access to the US or international ETFs is also required.

The main gold ETFs that are traded on stock exchanges throughout the world are as follows:

  • Aberdeen Standard Gold ETF Trust (NYSEArca: SGOL)
  • Goldman Sachs Physical Gold ETF (NYSEArca: AAAU)
  • iShares Gold Trust (NYSEArca: IAU)
  • GraniteShares Gold Trust (NYSEArca: BAR)
  • SPDR Gold Shares (NYSEArca: GLD)
  • iShares Physical Gold ETC (LSE: IGLN)
  • Invesco Physical Gold ETC (LSE: SGLD)
  • iShares S&P/TSX Global Gold Index ETF (TSX: XGD)
  • BMO Equal Weight Global Gold Index ETF (TSX: ZGD)
  • Horizons Gold Yield ETF Common (TSX: HGY)
  • Royal Canadian Mint – Canadian Gold Reserves (TSX: MNT)
  • WisdomTree Physical Gold (TYO: 1672)

Who should Invest in Gold Exchange Traded Funds

The gold ETF is a good option for investors who want to invest in gold but don't want to buy physical gold.

In the past, it was difficult to invest in this asset class because there were few options available - so if you wanted exposure to the yellow metal, you either had to purchase bullion or trade futures contracts on an exchange (which was quite risky). Today, you can easily access many different types of gold ETFs through your brokerage account or even your retirement plan.

Advantages of Gold Exchange Traded Funds

Investing in gold ETFs only entails purchasing gold in digital form. ETFs that track gold can be bought and sold the same way stocks can. Such investments have several benefits, particularly for Indian investors. Several of them are listed below- 

  • Investors can invest in gold using gold exchange-traded funds, which offer the ease of buying gold and the flexibility of stock investing.
  • Investors have steadily shifted to gold ETFs because they provide investment security, make it simple to follow gold prices, and eliminate the need for storage.
  • Gold ETF holdings are considered to be entirely transparent and reliable due to their direct gold price.
  • Compared to physical gold investments, gold ETFs are significantly more cost-effective investment solutions since they don't have making fees, storage expenses, or jeweler's margin. This is because of their distinctive structure and formation method.
  • Market watchdogs like SEBI strictly supervise the trading of Gold ETFs, ensuring that you obtain the maximum return on your investment and preventing fund houses from deceiving investors.
  • Due to the simple and open paperwork procedure, selling gold ETFs is a relatively simple process compared to selling actual gold, which is far more difficult and untrustworthy.
  • Exit load, entry load, wealth tax, security transaction tax, value-added tax, and sales tax are not incurred by gold ETFs.

Conclusion

Gold has been a popular investment for many years. It is considered to be one of the safest investments and can also provide you with steady returns. Gold ETFs are excellent for investors who want to invest in this precious metal but don't have enough money to purchase gold bullion or coins. You can buy these funds from your local bank or online broker, and they come with low fees on top of tax advantages since there is no capital gains tax payable on investments held longer than one year from the date when sold back into cash.

Why choose Hubble Money for short-term savings in Gold Jewelry?

As an investor, your portfolio should include long and short-term investments to meet different financial goals. Hubble Money offers you the option to create short-term investments for targeted purchases such as gold jewelry with its partner brands. You aget 10% rewards on each deposit made, making it easier to meet your goal.

How to create a savings plan on Hubble Money?

To create your plan, you must:

  1. Select the desired partner brand (for instance, Bluestone)
  2. Select the applicable savings plan displayed on the home page (for instance, ‘get 10% extra  on savings plan’) by clicking the Get Started button.
  3. A new page will open.
  4. Select the Customize option to change your deposit amount along with tenure.
  5. Review the plan to verify the selected details.
  6. Click the Pay button and complete the payment via your desired mode (such as UPI).
  7. Your savings plan will be made! 

FAQ

Which is preferable between gold ETFs and gold funds?

While Gold Funds are open-ended funds that invest in Gold ETFs and gold-producing firms, Gold ETFs invest directly in pure real gold. These two investments both provide returns that are almost equal. Both of them also come with distinct costs, such as creating a Demat Account for the Gold ETF and paying a large exit load for the Gold Fund. However, you can only invest in gold funds, not gold ETFs, if you want to use the SIP option.

Do gold ETFs distribute dividends?

While Gold funds invest in the equities of firms involved in the gold industry, Gold ETFs invest 95%–99% of their assets in actual gold and the remaining 5% in debt securities and associated instruments. As a result, whereas Gold ETFs do not pay dividends, Gold funds do.

What are the disadvantages of ETFs?

A Demat account is required for investors to invest in ETFs, and SIP investing is not available for these assets. In the case of ETFs, liquidity is also rather low.

Are ETFs more secure than stocks?

ETFs do really carry lower costs than other actively traded investment alternatives and are regarded as being safer than stocks.

Komal Chawla

Writer-by-chance and overthinker-by-choice, raging a war against the Pineapple-on-pizza brigade

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