Kolkata: Gold has hogged headlines for much of 2024 on account of the robust bull run in the prices of the precious metal. Gold ETFs (Exchange Traded Funds) and gold mutual funds are both dematerialised forms of investing in gold. But a lot of investors don’t have an idea as to what are the differences between gold ETFs and gold mutual fund. Significantly, each unit of a gold ETF stands for a portion of the value of gold. ETFs, or exchange traded funds, are, on the whole, similar to mutual funds. However, unlike mutual funds these can be traded on the stock exchanges. Therefore, investing in an ETF calls for a demat account.
Gold mutual funds are also called gold funds. These are open-ended mutual funds that invests in units of Gold ETFs. The target of these funds is to invest in gold of 99.5% purity. Therefore, gold mutual funds put their money in gold only through gold ETFs. Though both invest and profit from the movement of prices of the yellow metal, there are some differences between the two which investors must know so that they don’t confuse between the two.
Which is better, gold ETF or gold mutual fund?
To be sure, gold ETFs and gold funds share a few similarities. Both empower investors to profit from gold price movements without storing the metal or jewellery. However, there are differences on a few critical areas such as expense ratios, liquidity, and ease of trading. One can invest in gold mutual funds without having a demat account. On the other hand, gold ETFs are managed electronically and are listed on stock exchanges, enabling investors the opportunity for real-time trading and profiting from price fluctuations. One great feature of gold ETFs is that it is highly liquid. Gold ETF expenses are much lower than any cost that involved in storing gold.
Who can invest in Gold ETFs and gold mutual funds?
If an investor is seeking to diversify his/her portfolio beyond stocks and mutual funds, gold ETFs can be a useful instrument. They carry low risk since these invest in gold that are 99.5% pure. Therefore, risk wary investors can easily invest in gold ETFs. They also offer monitoring of gold prices in real time. Gold ETFs have another feature — some of them offer investors the option to convert their holdings into physical gold.
On the other hand, since they are a category of mutual funds, gold funds can be suitable for those who want to do SIP (Systematic Investment Plan), which is emerging as the preferred investment mode for millions of Indians. This is especially suitable for small investors. Moreover, since these are SIPs, timing the market does not remain a concern Moreover, an investor does not require a demat account to invest in gold funds.
(Disclaimer: This article is only meant to provide information. News9 does not recommend buying or selling shares or subscriptions of any IPO and Mutual Funds.)
While investing in gold is not only dictated by financial prudence in India but also by cultural traditions, modern methods of investing in demat form of the precious metal is attracting more and people. Gold ETFs and Gold mutual funds are two of the popular instruments that helps one to profit from the surging values of the metal without undertaking the harassment of owning and storing physical gold. Personal Finance Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
