Share prices have reached record highs in the record-breaking rally of the stock market. In such a situation, investors are diversifying their portfolios to balance them. This has led to an increase in their exposure to Gold Exchange Traded Funds (ETFs). In June, the number of gold ETF folios increased by 9.83% to 18.32 lakh on a monthly basis.
The number of gold ETF folios has jumped 41% in the last 6 months. The number of folios of Gold ETFs stood at 12.99 lakh in December 2020. The increase in the number of folios in June comes at a time when the price of 24-carat gold remained above Rs 47 thousand per 10 grams throughout the month. Apart from this, the Asset Under Management (AUM) of Gold ETF has also reached Rs 16,225 crore as of June 2021.
Harshvardhan Rungta, Certified Financial Planner, Rungta Securities, says that even if you love investing in gold, you should only invest in it with a limited amount. According to experts, only 10 to 15% of the total portfolio should be invested in gold. Investing in gold can give stability to your portfolio during a crisis, but it can reduce your portfolio's returns in the long run. Talking about the last 10 years, gold has given an average annual return of 10%.
It is an open-ended mutual fund, which is based on fluctuating gold prices. ETFs are very cost-effective. One gold ETF unit means 1 gram of gold. That too completely pure. It gives the flexibility of investing in stocks as well as investing in gold. Gold ETFs can be bought and sold on BSE and NSE just like stocks. However, you do not get gold in this. When you want to exit from it, then you will get money equal to the price of gold at that time.
You can also buy gold in small quantities: Through ETFs, you buy gold in units, where one unit is one gram. This makes it easy to buy gold in small amounts or through SIP (Systematic Investment Plan). Whereas physical gold is usually sold at the rate of Tola (10 grams). Many times it is not possible to buy gold in small quantities when buying from a jeweler.
Get Pure Gold: The price of Gold ETF is transparent and uniform. It follows the London Bullion Market Association, the global authority for precious metals. Whereas, physical gold can be offered by different sellers/jewelers at different prices. Gold purchased with Gold ETF is guaranteed to have 99.5% purity, which is the highest level of purity. The price of the gold you take will be based on this purity.
No Jewelry Making Expenses: There is a brokerage of 0.5% or less for buying gold ETFs, along with a 1% annual charge for managing the portfolio. This is nothing compared to the 8 to 30% making charges that the jeweler and the bank have to pay, whether you buy coins or bars.
Gold remains safe: Electronic gold is held in a Demat account in which only annual Demat charges have to be paid. Also, there is no fear of theft. On the other hand, in addition to the risk of theft in physical gold, it also has to be spent on its security.
Ease of Business: Gold ETFs can be bought and sold instantly without any hassle. This gives the ETF high liquidity. Gold ETFs can also be used as security for taking loans.
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