Buying gold in India is considered to be an investment rather than a luxury. Nowadays, you do not have to invest in gold in physical form rather you can buy gold funds too.
What are Gold funds?
As the name suggests, gold funds are investments that are made in physical gold or the stocks of gold mining companies. There are many types of gold funds:
- Gold Exchange Traded Funds or Gold ETF,
- Gold Mining funds and
- Gold Fund of Funds
To invest in Gold ETF’s the investor has to have a demat account. An investor can sell the units based on the market price of that particular time.
Things you should know about investing in gold funds:
- The gold ETF’s are more profitable than other gold-based investments because of its low investment, reduced tax liabilities like long-term capital gains tax with indexation benefit which is applicable after three years, and stock-like
- There is no need of a lump sum investing in gold ETF’s;one can also take the route of Systematic Investment Plan(SIP). In this route, the investor will invest a pre-determined amount every month
- The long-term returns from Gold funds are only equal to inflation,
- The investor should keep gold ETF’s as part of their portfolio for stable and steady returns, but should not keep it more than five or ten percent.
Advantages of investing in GOLD ETF:
- Gold funds are a safety net and hedge against the currency fluctuation and market inflation.
- An investor can start trading in Gold ETF’s by purchasing as low as 1 unit of gold which is equal to 1 gram of gold.
- The trading method of the gold fund is through the channels of stockbroker or the ETF fund manager.
- As the gold prices are available, the investor can decide whether to retain or sell the ETF ’s. The price of gold can be checked for the hour or the day.
- The Gold ETF’s can be bought or sold any time during the working hours of the stock exchange. This transaction can take place from any part of the country. The local price differences will not affect the investor.
- Gold ETFs held more than a year attracts long-term capital gains tax. However, there is no VAT, Wealth Tax or Securities Transaction Tax on gold ETFs.
How are they better than investing in physical gold?
Investing in Gold ETF is more advantageous than investing in physical gold as there is no possibility of theft or the problem of physical storage. The Gold ETF’s are not charged with making charges or any other tax except the long-term capital gains tax. As the Gold ETF’s are priced as per international standards, the investor can eliminate the fear of buying gold at higher prices.
Like other mutual fund investments, you should do thorough research before investing in a gold fund. The financial experts at WealthApp can assist you in selecting the right gold fund for your financial requirements.