Gold ETF inflows hit a 16-month excessive in August 2023. Should you make investments?

Gold exchange-traded funds (ETFs) attracted ₹1,028 crore in August, making it the very best influx since April 2022, knowledge from the Association of Mutual Funds in India (Amfi) confirmed. This got here following an influx of ₹456 crore within the phase in July. 

What are gold ETFs

Gold ETFs are models representing bodily gold which can be in paper or dematerialised kind. Due to their itemizing and buying and selling on inventory exchanges, gold ETFs are secure investments which are ruled by tight rules. The required minimal funding is one unit of the gold ETF, which is the same as the worth of 1 gram of real gold. Since they’re listed, gold ETFs are simple to commerce on the inventory market and have wonderful liquidity.

Who ought to spend money on Gold ETFs?

Investing in gold is a vital part of asset allocation.

“There are some ways to spend money on gold. ETFs are surely one of the crucial well-liked choices.  Thus, if you wish to make investments for the quick time period, gold ETF is an effective various as a result of liquidity is powerful, however if you wish to make investments for the long run, SGB is the best possibility,” said Mukesh Kochar, National Head – Wealth, AUM Capital.

“Investing in Gold ETF has the potential so as to add shine to your portfolio. An investor can contemplate allocating as much as 10% of the portfolio in the direction of Gold ETFs,” said Chintan Haria, Head – of Investment Strategy, ICICI Prudential AMC.

Advantages of investing in Gold ETF

-Convenience to buy and sell gold ETF units like an equity share through a trading account

-It is safe from theft as it is stored in a Demat account

-One need not worry about the purity aspect as the investment is backed by gold bullion of only 99% purity or above.

SGB vs Gold ETFs: Where should investors park their money for long term?

However, if the investment is intended for a long period of time, Mukesh Kochar recommends investing in Sovereign Gold Bonds (SGBs). This is because SGB offers 2.50% interest per year. “Your cost of keeping is lowered by 2.50% every year, which ETFs and other gold investment options do not,” mentioned Kochar.  

Furthermore, the return is tax-free if held to maturity, which isn’t the case with every other various. Although these are traded on exchanges, liquidity is restricted, he added.

Disclaimer: The views and proposals made above are these of particular person analysts, and never of Mint. We advise buyers to test with licensed consultants earlier than taking any funding choices.

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Updated: 19 Sep 2023, 02:12 PM IST