Gold is seen as a symbol of wealth from ancient instances in India, and more typically it is also used to hedge against inflation.
One can invest in this valuable metal in distinctive techniques, for instance, investing by means of physical gold, Gold ETFs, Gold mutual funds, and sovereign gold bonds. Having mentioned so, professionals say, investing in gold ETFs and gold mutual funds is a superior way of investing in gold.
For instance, physical gold is ideal suited for ornamental applications. On the other hand, even although Gold ETFs and Gold Mutual Funds are very related, they come with some variations.
Gold ETFs are commodity-based mutual funds that invest in gold as the principal asset. Gold ETFs are passive investment instruments that aim to track the domestic gold value. It invests either in physical gold or stocks of organizations engaged in gold mining or refining. The units of a gold ETF are traded on a stock exchange, just like stocks. One unit of a gold ETF represents one gram of gold. Investors need to have to have a Demat account to invest in gold ETFs.
Gold mutual fund, on the other hand, functions on a fund of fund structure that mostly invest in Gold ETFs as an underline asset. Gold mutual funds are equity funds – wherein the portfolio consists of stocks of organizations involved in gold mining, production and distribution. Investors do not need to have to have a Demat account to invest in gold mutual funds. Gold mutual funds may possibly also invest in gold ETFs.
With investment in Gold ETFs, it is mandatory to have a Demat account, as investments can be made only in a dematerialized type. While investment in a Gold Mutual Fund can be made even with out a Demat account. Being a mutual fund scheme, gold MFs provides a minimum quantity as low as Rs 500 or prescribed in the scheme.
Experts say, for investors hunting to make a frequent investment alternatively of a one-shot investment, then the gold fund selection is superior and rewarding. However, for these hunting for a price-successful selection to invest in valuable metal, then gold ETF is regarded to be the correct option.