Why are Gold ETFs a Must-Buy?

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Gold Exchange Funds (ETFs) have been making a significant roar in the market. Like any other stock of a company, Gold ETFs are listed and traded on the National Stock Exchange of India (NSE) and Bombay Stock Exchange Ltd. (BSE).

Additionally, like any other firm stock, Gold ETFs can be bought and sold continually at market rates on the cash segment of the BSE and NSE.

What are Gold ETFs?

Gold Exchange Traded Fund is an economic good-based mutual fund that invests in assets like gold. When compared with physical gold, gold ETFs are less expensive. Thus, consumers can easily purchase a single unit of an ETF when compared to physical gold.

According to industry experts, buying gold through gold exchange-traded funds (ETFs) is beneficial for investors because the transaction is electronic and the investor need not worry about the storage or security of the gold. As a result, the investor is spared the inconvenience of storage, security and anxiety about pure gold.

Benefits of Investing in Gold ETFs

Gold ETF funds can be used as an industry-exchange traded fund. Trading with Gold Exchange Traded Funds (ETFs) can have several advantages when compared with buying physical gold. Some of them include:

➢ While purchasing Gold ETF units, no making fees is required. For actual gold jewellery, coins, bars and other tangible items, this is not true. 

➢ In contrast to actual gold, which you must store in a bank locker and then pay the locker costs to the bank as well, Gold ETF units given to you are connected to your credentials (KYC), so you need not worry about them being stolen.

➢ While purchasing Gold ETF units, you do not need to be concerned about the purity of the metal, which must be verified with a hallmark at the time of purchasing physical gold.

➢ The Indian economy is currently outpacing the rest of the world. The value of the Gold ETF you possess will increase when the Rupee's position in the market strengthens and the Dollar's position deteriorates.

➢ Gold ETFs offer more liquidity when compared with physical gold. Gold ETFs are quite simple to buy and sell. Short-term, medium-term and long-term investors can all use Gold ETFs as an investment vehicle.

Rising Importance of Gold ETFs

Some of the key features that makes Gold ETFs an important investment are:

  1. Transparency: The price of gold on the stock exchange is open to the public, much like equities and shares. Checking the current gold prices for the day or the hour will allow you to determine the value of your investment portfolio.
  2. Easy Trading: To begin trading in ETFs, one can purchase as little as one unit and have the flexibility of buying more units depending on liquidity and prevailing gold prices.You can purchase and sell the units daily or even hourly through your stock broker or ETF fund manager.
  3. Cost-Effective: There are also no entry and exit loads for trading gold ETFs making them more profitable.
  4. Low-Risk High Reward: Gold prices typically fluctuate less than those of stocks. This implies that Gold ETFs could serve as your safety net even if your returns on stocks decline. It will keep you from suffering significant losses.
  5. Tax benefits: After a year, gold ETFs are subject to long-term capital gains tax. In Gold ETFs, taxes are applicable on both long- and short-term capital gain. Long-term capital gains tax is taxed at 20% after indexation on gold ETF investments held for more than 36 months. For investment held up to 36 months shall be treated as short-term capital gain, the capital gains tax will be levied as per applicable tax slab of unitholders.
  6. No Theft Fear: A Demat account for gold protects the investor from the worries that           

actual gold entails. Additionally, it enables investors to avoid paying locker fees that would otherwise be required to keep the real gold secure.

How to Invest in Gold ETFs?

There are two ways to invest in Gold ETFs: one is a direct route and the other is an indirect route.

Direct route: In the direct route, a Demat account must be opened through a stock broker in order to purchase units of Gold ETFs. Following that, Gold ETF units can be bought directly through stock exchanges in the same way that we buy shares.

Indirect route: If a person decides against investing in Gold ETFs through the Demat option, they can invest in gold funds indirectly. For example, let us choose the HDFC Gold fund, which invests in HDFC Gold ETFs. Investors who find it more convenient or understandable to invest in mutual funds through their app typically choose this option.

Who should Invest in Gold ETFs?

Since Gold ETFs come in a variety of denominations, they are perfect for all sorts of investors. One unit of a traded fund, which equals to one gram of gold, is all it takes to get started with investing.


ETFs provide a guarantee of 99.5% purity and safety with regard to storage and maintenance compared to purchasing real gold. According to experts, boosting the Gold ETF investments will strengthen the stock portfolio. Depending on your risk tolerance, availability of funds and the expectation for the price of gold, you could invest 5% to 10% of your assets in gold.

If you are interested to learn more about Gold ETFs, planned investments, budgeting, saving and planning your wealth creation process, get in touch with mastertrust.

Disclaimer - Any advice or information in the blog is a general advice for education purpose only and should not be considered as recommendation, please get in touch with a financial advisor for discussing your portfolio and asset classes.