How to Invest in Gold ETF?

Gold ETF is one of the popular modes of investment, especially in India, where the majority is more inclined towards investing in gold for ages. Investment in gold has different values and a sense of emotion across India. It is something that is rooted in ancient Indian culture. How to invest in gold ETF can be categorized into a number of options, such as Gold Jewelry, Gold Bars, Gold Coins, Gold Mutual Funds, Sovereign Gold Bond Schemes, and Gold ETF. Read on to learn more about the best gold ETF in India, how to invest in gold ETF, which gold ETF is best, and more details.

Gold ETF Meaning

Gold ETF, or Gold ETF investment, is a mutual fund-based commodity that invests in assets like gold. You can trade ETFs, which are operated and traded on the stock exchange similar to individual stocks. Here, physical gold is represented by exchange-traded funds in both dematerialized and paper forms. Rather than buying actual gold, you can buy shares of these funds, and when those stocks are sold, you receive the cash equal to each unit.

Gold ETF vs Physical Gold

Gold ETFs are a convenient alternative to buying physical gold as they remove the need for storage and security. They offer easy liquidity since you can sell them anytime through the stock exchange, while selling physical gold usually involves finding a buyer or visiting a jeweler. ETFs represent high-purity gold, typically 99.5% or more, whereas the purity of physical gold can vary. In terms of cost, ETFs only have small annual management fees, while physical gold comes with making charges and taxes. Overall, Gold ETFs work well for pure investment purposes, while physical gold is preferred for personal use like jewelry or gifting.

Table of Contents

1. Gold ETF Meaning
2. How to Buy the Best Gold ETF in India?
3. How does a Gold ETF work?
4. Why is investing in Best Gold ETF the best investment?
5. Points to remember before investing in Gold ETFs

How to Buy the Best Gold ETF in India?

You can easily buy the best Gold ETF in India by following the below steps:

• Step 1:  Open a trading and Demat account with a registered stockbroker.
• Step 2: Create your account using your login ID and password and log in to your account.
• Step 3: Choose the Gold ETF to either buy entirely or opt for systematic SIPs.
• Step 4: Confirm the order and monitor your investment using your trading account.
• Step 5: Once confirmed, you will receive a confirmation message on your phone or email address.

Please note you have the option to select Mutual Funds that have an innate gold ETF.

How does a Gold ETF work?

Before investing in Gold ETF, you must understand how Gold ETF works. So, when you buy shares in the ETF, it acts as a portion of actual gold held by the fund. The fluctuation in the value of ETFs is directly related to the price of gold. You can have the advantage of owning gold without physically owning it. Each part of a Gold ETF represents one gram of gold with high purity. The actual gold is securely kept in the bank’s vault, acting as the basis for the value of the ETF units. The price of each unit closely reflects the price of 1 gram of gold. Various funds let you buy and sell gold ETFs.

Why is investing in Best Gold ETF the best investment?

Investing in Gold ETF offers various advantages:

1. Flexibility: Investing in Gold ETF offers the flexibility. You can enter and exit at your own will on highly liquid stock exchanges. This offers you quick and responsive trading. Only 0.5% to 1% of each transaction's cost is allocated to brokerage for investors.
2. Storage Charge: With Gold ETF, you don’t have to worry about any storage charges or risk of theft. It offers a secure investment option as you are required a demat account for gold etf, ensuring a streamlined and digital trading process.
3. Tax and Cost-Efficient: You are not required to pay any entry or exit charges for investing in Gold ETFs. This helps in a convenient and hassle-free option to invest in gold. Moreover, with Gold ETF taxation in India you don’t have to worry about tax as it is cost-efficient, minimizing your financial burdens.

Points to remember before investing in Gold ETFs

If you are considering investing in Gold ETFs, you must know the following points before investing in Gold ETFs:

• Gold ETFs are best for short- to medium-term financial goals. Historically, it has offered 10% annual returns.
• You must consider factors such as low fees and check recent performance for effective management while selecting a Gold ETF or fund manager.
• To maintain stability and consistent returns, you must allocate 5–10% of your portfolio to Gold ETFs. Also, you must look for reasonable options, as brokerage fees are generally around 0.5–1%.
• Before making a transaction, observe gold price trends. Similar to stocks, you must buy at low and sell at high for potential gains.  
• Gold ETFs are regulated by SEBI, ensuring each unit is backed by actual gold value. For portfolio effectiveness, you must monitor your Gold ETF account regularly.

Conclusion
Investing in Gold ETFs is considered a wise investment choice as it produces income through returns and is often used as collateral for loans. It is considered the best investment option if you are looking to protect your portfolio. Once you understand the fundamentals, you must allocate a portion of your portfolio to Gold ETFs.