Gold ETFs: Should you invest in them?

Compared to physical gold investments, gold ETFs are known to be less expensive and offer an investor the flexibility to purchase as low as one unit of gold.

Industry experts say, investors have a boon looking at investing in Gold ETFs as the purchase is in electronic form, and the investor does not have to worry about the storage and security of the gold. Hence, the investor is saved from the hassle of storage and security and the worry of gold purity.

Who should invest in Gold ETFs?

Chintan Haria, Head of Product Development & Strategy, ICICI Prudential AMC says, “All investors should allocate to Gold ETF as part of a good portfolio construction approach.”

Based on the requirements, experts say investors can invest either in lump sums or in a staggered manner through a systematic investment plan (SIP). Gold ETF allows an investor to purchase as low as one unit (1 / 1000th gram ~ Rs 50 per unit).

Advantages of buying gold ETFs

Gold ETFs offer some distinct advantages. Since ETFs are held in electronic form in a Demat account, an investor can be at ease regarding matters like security, storage and gold purity.

Haria explains, “An investor can buy or sell Gold ETF units just like an equity share on the exchanges during market hours through a trading account.”

He further adds, “The convenience of investing in multiple of 1 unit (approximately Rs 50) allows every investor to participate in the Gold ETF and makes it easy to accumulate units over a period.”

The cost of acquisition of Gold ETFs is low given the absence of making charges and other related expenses.

Tax treatment of Gold ETFs

Gold ETF is a tax-efficient way of owning gold as income earned from Gold ETF is treated as capital gains, short-term or long-term, depending on the holding period.

“Long term capital gains (more than 3 years) are subject to 20 per cent tax with indexation benefits while short term capital gains get added to your income and are taxed as per the investor’s tax slab rate,” adds Haria.

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