How does investing in Physical gold compare with investing in Gold ETFs and Gold Funds in the Indian context?
Answer
Answer
Physical Gold Holdings
Gold ETFs (Exchange Traded Funds) Holdings
Gold Funds Holdings
Here the investment is made in physical gold like bars, coins, jewellery etc
Investor buys a proportionate value of gold but not in the physical form but in ETF form
The investment is made in bullion and companies involved in mining gold
No need for Demat account
The investor needs a Demat account
No need for a Demat account to invest
Market fluctuations directly affect the prices of physical gold and is linked to global price
Changes in the gold prices affect that of Gold ETFs indirectly by impacting the underlying
Changes in the gold prices doesn’t affect Gold funds directly
No additional charges other than the physical gold itself
Gold ETFs involve asset management and brokerage fees with the TER debited daily
There’s a minimum charge to manage the gold funds.
Risks of theft and burglary associated with storing physical gold is quite high and that is a major demerit of this method
Gold ETFs remove the burden of trading gold in the physical form and is one of the safest ways to hold gold
Eliminates the risk of theft/ burglary and buffers investments to changing market fluctuations
No paperwork required for investing
Paperwork required for investing in Gold ETFs including KYC
Paperwork is required for investing in Gold funds
Systematic Investment Plan (SIP) not available
No SIP option since ETFs are closed ended
SIP available
Best suited for conventional investors
Best suited for investors who have the required time and skill set to trade
Best suited for investors who expect high returns taking calculated risks