Gold ETFs are open-ended mutual fund schemes that will invest the money collected from investors in standard gold bullion (0.995 purity). The investors' holding will be denoted in units, which will be listed on a stock exchange.They provide returns that would closely track the returns from physical gold in the spot market.
An investor can buy and redeem the units either directly from the mutual fund or from the stock exchange.Presently there are many Gold ETFs traded in NSE India. Some of the listed Gold ETFs are GoldBees,Reliance Gold,Kotak Gold,UTI Goldshare
Why choose Gold?
Gold holds its own in any investment evaluation on its strengths as a hedge against inflation, value in the event of political uncertainties and its traditionally negative co-relation with other asset classes such as stocks, fixed income securities and commodities.
The value of goods and services that gold can buy has remained stable unlike currencies that have seen significant fluctuation. A study spanning a 400-year period has shown that the basket of goods and services that gold could buy over the period has remained the same.
What returns can you expect?
The 35 per cent return that gold has delivered in the last one year and 170 per cent absolute return in the last five years is not par for the course. In the period 1970-1982, gold prices had a compounded annual growth rate (CAGR) of around 21 per cent while inflation grew by 14.1 per cent over the same period. But in the following 23 years, inflation grew by 7.6 per cent while gold prices grew by 7.78 per cent.
Why gold ETFs?
There are enough reasons why gold should be included in any investor's portfolio.Investing in gold ETFs will give the investor all the advantages of investing in gold while eliminating drawbacks of physical gold - cost of storage, liquidity and purity, among others.
Gold ETFs allow investment in gold in small denominations, which makes it easier for the retail investor to participate. On the secondary market, the minimum lot is one unit. This enables the investor to accumulate units over time and reap the benefits of rupee cost averaging. The units can be redeemed either from the fund directly or from the market.
How will I invest in Gold ETFs?
Just like you invest in shares. You will need to have a demat account. These Gold ETFs are listed in NSE and the daily movement in their prices can be checked online like the way you keep track of your equity portfolio.
The following picture would clarify about different options available gold investing. The picture clearly shows investing in Gold ETF is better than other options.
Go for gold !
Update: For more details and live Gold Bees Price read this post Goldman Sachs Gold Bees