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  • Steps in buying Gold ETF (Through an Online Trading Account)
  • How to pick the right Gold ETF
  • Features & benefits of Gold ETFs
  • Ease of participation in the gold market
  • Use of exchange platform (NSE)
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What is Gold ETF's ?

A Gold ETF is an exchange-traded fund (ETF) that aims to track the domestic physical gold price. They are passive investment instruments that are based on gold prices and invest in gold bullion. In short, Gold ETFs are units representing physical gold which may be in paper or dematerialised form

Features & benefits of Gold ETFs

Gold ETFs can be purchased online and placed in your Demat account. The asset management company (AMC) is responsible for trading them on a stock exchange. Meaning, you can enter/exit whenever required. Even in the Demat format, gold ETFs behave the same as physical gold.

Gold ETFs offer high liquidity as they can be traded in the stock exchange during a trading session at the prevailing price. Also, the transactional expenses (broker fee and govt duty) is less than that of physical gold.

Approaching a retailer will need a large amount of money to purchase gold. However, in the case of gold ETFs, you have the advantage to decide the quantum you wish to buy and sell.

With gold ETFs, investors acquire exposure to the gold market – a transparent, profitable and safe platform. Also, they come with significant liquidity as gold can be traded instantly without any hassle

Gold ETFs do not levy wealth tax on Gold ETFs as opposed to physical gold. Storage (in demat account) and safety are no issues either. Hence, you can hold on to your ETFs for as long as you want.

They offer a tax-friendly means to hold gold as the returns generated from Gold ETFs are subject to long-term capital gains tax. However, there will be no additional burden of sales tax, VAT, or wealth tax.

Gold ETF investors can use the stock exchange platform – National Stock Exchange (NSE) – to keep transactions and trade transparently.

Aside from listing and trading on the stock exchange, you can also use it as security for secured loans. Transactions are quicker and seamless with zero entry and exit load.

Golf ETFs do not attract making charges like physical gold in the form of ornaments or bars. You can purchase it at international rates. Hence, there will be no mark-up at all.

Like any equity fund, the NAV or Net Asset Value of a gold ETF can go up or down as per the market trends. Similarly, the extra expenses like the fund manager’s fee and others can impact the returns.

Steps in buying Gold ETF (Through an Online Trading Account)

1: Open an online trading and demat account with a stock broker

2: Log in to the website of the broker’s online trading portal using your login ID and password.

3: Choose the Gold ETF you want to invest in

4: Place the buy order for the purchase of a specified number of Gold ETF units

5: Web system debits your bank account (Fund transfer through linked savings account)

6: Units are credited to your demat account on trade day + 2nd day

How to pick the right Gold ETF

There are about twelve Gold ETFs in the market. Performance of these funds would largely be in the same range as it is linked to the movement in  prices of physical gold. Keep an eye on tracking error and the trading volume. Opt for funds with lower tracking error and higher trading volumes. There is no lock-in of funds and buying, selling can happen during trading hours (i.e., 9.15 hrs to 15.30 hrs). Therefore, avoid partial withdrawals or early exits, and link your investments to a long term goal.

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