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Akshaya Tritiya - Gold, Gold ETFs or Gold Funds?

Akshaya Tritiya, by Indian tradition, is considered an auspicious day for buying gold. Nowadays, there are quite a few options for investors who want to invest in gold, other than physical gold. Prominent among them are Gold ETFs,Gold Funds and Gold coins from banks. Let us take a look some of the advantages and disadvantages of these products.

Akshaya Tritiya


Physical Gold or Gold coins: 

Buying and selling physical gold adds substantial costs to your purchases, since jewelers always charges a making cost of 7 to 21 per cent over and above the price of gold. Also, when you want to sell it back to the same jeweler, you would be offered lesser price than the market price, which is a big disadvantage in investing in physical gold.Also storing your physical gold in lockers can cost you about Rs.1000-5000, depending on the institutions which offer you lockers and there are always risks associated with such placements.

As far as Gold coins are concerned, they are similiar to physical gold, involving costs of about 4-5% of the price of the gold.You can either buy these coins from the jeweller or from leading banks. You have to note that,you cannot sell the coins back to the banks as most of them don't offer such facility.

Gold ETFs:

Exchange Trader Funds or ETFs: If you have missed earlier article about Gold ETFs, you can read it here at Gold ETFs. In short, ETFs are cheaper, liquid and easily bought and sold through any stock broker with a Dmat account. Check out the list of Gold ETFs avaialble.

Gold funds: 

Gold funds ( Fund of funds) are similar to ETFs, but more simpler. They don't require Dmat accounts like ETFs and there could be some charges like entry and exit loads. These charges are less than 1%, which is the same you have to pay your stock broker when purchasing ETFs, so not much of a difference. The advantage with gold funds is that they can be bought with any amount as low as Rs.500 or 1000 depending upon the mutual fund. Also, SIP option is available, in which one can invest fixed amount every month. Check out about the features and various Gold Funds.

Conclusion:

Considering the pros and cons of all the investing options available, Gold Funds are better and ideal for retail investors and the next better option could be Gold Etfs. Now the bigger question is whether one can invest in gold at these prices ? Investors need to understand, gold as an asset class has given positive returns for the past 10 consecutive years. The prices cannot go up continously and they can correct and correct substantially. Also investing in gold should be limited to 10-15% of one's portfolio and Gold alone should not be one's core portfolio.

 Invest wisely !

Comments

  1. Very informative and useful. Thanks

    ReplyDelete
  2. NSE has announced a special trading session on 24th April, from 6 pm -8 pm

    ReplyDelete
  3. You have not make compare with NSEL E-gold.

    Please reply for not considering with this.

    ReplyDelete
  4. NSEL E-gold is similar to ETFs, but one can take delivery,which is not possible with ETFs. Again if one takes delivery there is always the cumbersome procedures and charges. You can read more about E-gold here: http://www.masterandstudent.com/2011/09/what-is-e-gold-and-e-silver-from.html

    ReplyDelete
  5. If you have any other queries pl use the contact form, will be glad to help you.

    ReplyDelete
  6. Update: NSE has announced a special trading session on 24th April, from 4.30 pm - 8 pm

    ReplyDelete
  7. You missed to mention charges of ETF and Gold Fund (FOF)..Tracking error.

    ReplyDelete
  8. yes, swaraj. but these charges and tracking error minimal (limited to 1-1.5%) when compared to high charges( about 8-15%) collected by the jewellers, in the name of making charges and wastage charges.

    ReplyDelete

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