Financial Awareness Level
How to Invest in Gold ETFs in India: A Step-by-Step Guide for Beginners
Introduction With the growing shift towards digital investing, Gold Exchange Traded Funds (ETFs) have become a popular choice for Indian investors looking to gain exposure to gold without dealing with its physical form. Gold ETFs combine the security of gold with the convenience of stock market investing. In this guide, we explain how to invest in Gold ETFs, how they work, and the key benefits and considerations.
What is a Gold ETF?
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. One Gold ETF unit is equal to 1 gram of gold and is backed by physical gold of very high purity. These ETFs are listed on stock exchanges like NSE and BSE and are traded like stocks.
How Does a Gold ETF Work?
- Gold ETFs invest in 99.5% pure physical gold.
- The fund house holds the gold in secure vaults.
- The NAV of the ETF fluctuates based on the domestic gold price.
- Investors benefit from the price movement of gold without physically owning it.
How to Invest in Gold ETFs in India: Step-by-Step
1.Open a Demat and Trading Account
- Required to buy/sell ETFs since they are traded on the stock exchange.
- Can be opened with a SEBI-registered broker.
2.Choose a Gold ETF Scheme
- Look for ETFs offered by different AMCs.
- Compare based on tracking error, expense ratio, and past performance. You are recommended to seek advice from your financial advisor.
3.Place a Buy Order
- Log into your trading platform.
- Search the ETF by its symbol .
- Enter the quantity and place a buy order during market hours.
4.Settlement and Holding
- Once the transaction is complete, ETF units are credited to your Demat account.
- You can sell them any time during trading hours, just like stocks.
Benefits of Investing in Gold ETFs
- No Storage Hassles: No risk of theft or purity issues
- High Liquidity: Easily tradable on exchanges during market hours
- Price Transparency: Real-time gold price tracking
- Cost-Effective: Lower expense ratio compared to physical gold or gold mutual funds
- Regulated & Secure: SEBI-regulated, backed by physical gold held in vaults
Important Points to Consider
- Gold ETFs do not offer SIP options directly (some brokers provide workarounds)
- There may be brokerage charges and transaction fees
- Tracking error can slightly affect returns versus actual gold price
- Suitable for investors with medium to long-term horizons
Conclusion
Investing in Gold ETFs is a smart and efficient way to gain exposure to gold in a digital and regulated format. With the added advantage of liquidity, transparency, and lower costs, Gold ETFs serve as a convenient hedge against inflation and market volatility. As always, align your gold allocation with your overall financial goals. (You are recommended to seek advice from financial advisor before you take any/refrain from any action).
Additional links:
What is a Mutual Fund? - Beginner's Guide to Investing
AMFI - Introduction to Mutual Funds
FAQ Section
Do I need a Demat account to invest in Gold ETFs?
Yes, since Gold ETFs are traded on stock exchanges, a Demat and trading account is necessary.
Can I invest small amounts in Gold ETFs?
Yes, based on the scheme information document specific to each mutual fund.
Are Gold ETFs safe?
Yes. They are regulated by SEBI and backed by physical gold stored in secure vaults. (You are recommended to seek advice from financial advisor before you take any/refrain from any action).
How is the performance of a Gold ETF measured?
It is measured by its NAV, which is linked to the domestic price of gold, adjusted for tracking error and expenses.
Can I do SIP in Gold ETFs?
Direct SIP is not available, but you can schedule regular purchases via your broker’s features.
Are Gold ETFs better than buying physical gold?
For investment purposes, yes—due to liquidity, lower costs, and storage safety. (You are recommended to seek advice from financial advisor before you take any/refrain from any action).
How are Gold ETFs taxed in India?
Gold ETFs are treated as non-equity investments. Gains are taxed at 20% with indexation (if held for over 3 years) or as per income tax slab (if held for less).
What are the charges involved in Gold ETF investing?
You may pay brokerage, Demat maintenance, and a small fund management fee (expense ratio). (You are recommended to seek advice from financial advisor before you take any/refrain from any action).
Can I sell my Gold ETFs any time?
Yes, you can sell them on the exchange during trading hours, similar to stocks.
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An Investor Education And Awareness Initiative
Visit https://www.hdfcfund.com/information/key-know-how to know more about the process to complete a one-time Know Your Customer (KYC) requirement to invest in Mutual Funds. Investors should only deal with registered Mutual Funds, details of which can be verified on the SEBI website (www.sebi.gov.in/intermediaries.html). For any queries, complaints & grievance redressal, investors may reach out to the AMCs and / or Investor Relations Officers. Additionally, investors may also lodge complaints directly with the AMCs. If they are not satisfied with the resolutions given by AMCs, they may raise complaint through the SCORES portal on https://scores.sebi.gov.in/scores-home/. SCORES portal facilitates investors to lodge complaint online with SEBI and subsequently view its status. In case the investor is not satisfied with the resolution of the complaints raised directly with the AMCs or through the SCORES portal, they may file any complaint on the Smart ODR on https://smartodr.in/login.
The information is for general purposes only and not an investment advice. Readers should seek professional advice before taking any investment related decisions.
MUTUAL FUND INVESTMENTS ARE SUBJECT TO MARKET RISKS, READ ALL SCHEME RELATED DOCUMENTS CAREFULLY
