ETF! Quite an uncommon term, isn't it? It is one of the most popular investment options available to modern-day investors. It tracks the gold price in the domestic market. They are also passive in nature and are based on gold prices. They invest in bullion. Curious about bullions? Bullions are gold, silver, or other precious metals in the form of bars or coins. We hereby discuss the top gold ETFs in India for the benefit of our readers.
What are Exchange Traded Funds?
Exchange-Traded Fund or ETF collect money from several investors and purchase assets such as shares, bonds, and derivatives. Securities and Exchange Board of India(SEBI) registers ETF's. Exchanges like BSE and NSE list them. They are also an attractive investment option for investors with limited trading knowledge.
List of Gold ETF Funds in India
Here is the list of top 10 gold ETFs in India for 2020,
|6 months||1 year||3 year||5 year|
|Goldman Sachs Gold BEes||14.7||7.5||-1.7||6.8|
|SBI Gold ETF||15||7.3||-1.7||7|
|R*Shares (Reliance) Gold ETF||15||7.2||-1.9||6.8|
|HDFC Gold ETF||14.3||7||-1.9||6.7|
|Axis Gold ETF||14.6||7.2||-1.9||6.7|
|UTI Gold ETF||14.7||7.1||-1.9||6.8|
|ICICI Prudential Gold ETF||14.6||7.1||-1.7||6.8|
|IDBI Gold ETF||14.6||7.3||-1.8||-|
|Birla Sun Life Gold ETF||14.8||7.6||-1.7||-|
|Canara Robeco Gold ETF||10.4||3.6||-3.6||-|
Enter your details and request a FREE ADVISORY CALLBACK
1. Goldman Sachs Gold BEes
It is arguably one of the best gold ETF in India as per the AUM figures. According to the December 2015 reports, the Goldman Sachs Gold BEes had an AUM of Rs 1636.65 crore. Subsequently, the NAV of this scheme was priced at Rs 2726.76 in February 2016. Its returns are consequently listed in the table.
2. SBI Gold ETF
State Bank of India’s gold ETF in India scheme had registered an AUM of Rs 917.58 crore in December 2015. Subsequently, its NAV in February 2016 was Rs 2797.71 crore. The table has the returns on this fund.
3. R*Shares (Reliance) Gold ETF
Reliance Mutual Funds had launched R*Shares (Reliance) Gold ETF and this gold eft had an AUM of Rs 1304.84 in December 2015. It is also one of the best performing gold ETFs in India. Consequently, the NAV was Rs 2652.32 in February 2016. The table has the returns on this fund.
4. HDFC Gold ETF
HDFC Mutual Fund had launched HDFC Gold ETF and its AUM of Rs 561.67 crore in December 2015. Subsequently, it had a NAV of Rs 2778.18 per unit in February 2016. The returns from this fund are as per the table.
5. Axis Gold ETF
Axis Mutual Fund’s Axis Gold ETF had an AUM of Rs 241.48 crore in December 2015. Subsequently, the NAV of this scheme was Rs 2777.86 per unit in February 2016. The table has the returns on this fund.
6. UTI Gold ETF
UTI Mutual Fund’s UTI Gold ETF had an AUM of Rs 446.30 crore in December 2015. Subsequently, the NAV was Rs 2729.72 in February 2016. The table has the returns on this scheme.
7. ICICI Prudential Gold ETF
ICICI Prudential Mutual Fund’s ICICI Prudential Gold ETF had an AUM of Rs 113.44 crore in December 2015. Subsequently, the NAV of this scheme was Rs 2813.84 in February 2016. The table has the returns on this fund.
8. IDBI Gold ETF
IDBI Mutual Fund’s IDBI Gold ETF had an AUM of Rs 96.70 crore in December 2015. Subsequently, it had a NAV of Rs 2849 per unit in February 2016. The table has the returns on this fund.
9. Birla Sun Life Gold ETF
Birla Sun Life Mutual Fund’s Birla Sun Life Gold ETF had an AUM of Rs 72.26 crore in December 2015. The scheme had a NAV of Rs 2854.44 per unit in February 2016. The table has the returns on this fund.
10. Canara Robeco Gold ETF
Canara Robeco Mutual Fund’s Canara Robeco Gold ETF had an AUM of Rs 85.93 crores in December 2015. Subsequently, the NAV of the scheme was Rs 2703.88 crores in February 2016. The table has the returns on this fund.
Features of Gold ETFs
1. Liquidity: ETF's are highly liquid.
2. Flexible: ETF’s are also flexible. It is so as they can be bought online and stored easily in a Demat account. There is thus no need of storing it in any physical form.
3. No Investment Limit: Investors can thus buy as little as 1 gram of gold which is equivalent to one unit of ETF.
4. Pricing: Expense ration on ETF is a maximum of 1%. However, there are additional transaction costs linked to the buying or selling of the ETF.
5. Tax Treatment: Taxing on Gold ETF is as per the holding period of the investment. In case they are sold before 36 months, the taxing is thus done according to the income tax slabs. If the holding period is more than 36 months, a 20.8 tax is charged including cess.
Advantages of Gold ETF
1. Firstly, there are NO additional taxations like Wealth tax, Security Transaction Tax, VAT, and Sales Tax.
2. Secondly, the investors get transparency and real-time gold price.
3. Thirdly, ETFs are listed and traded on the stock exchanges.
4. Fourthly, there is no fear of theft as they are SAFE in the Demat accounts. Investors also save on the locker charges.
5. Lastly, they are tax-efficient as the returns are treated as long term capital gains.
Who should invest in this Fund?
According to the opinion of the market experts, gold ETFs in India is suitable for investors who are looking to invest in gold but are also not confident of investing in physical gold. Moreover, investors might be doubtful about the purity of gold and storage problems. This option thus gives them tax benefits as well. Making charge is nil. So investors can save hugely if their investment is substantial. Investors can subsequently purchase as low as 1 gram of gold(equal to 1 unit).
Things to be considered before investing
1. Check the Expense ratio: You must therefore remember that Gold ETF’s are run by mutual fund industries. They charge an annual maintenance fee as well as expense fees on the portfolio. Gold unlike equity stocks doesn’t generally give 10% to 30% returns. Moreover, Gold with a 5% return is good. If the AMC charges higher fees than it will reduce your investment value.
2. Daily volume of Gold ETF: It is thus important to check for the average daily volume of the gold ETF being traded on the exchanges. You can thus visit various financial websites or exchange websites to get this information. If the volume is too low, you should avoid that gold ETF. It will ultimately make you buy at a higher price and thus force you to sell at a lower price, which can cause a loss to you.
3. Low Tracking Error: Gold ETF’s NAV is also considered to be equal to the market price at a particular time. However, it is not necessarily true. Moreover, there can be variations in the value of the ETF in comparison to the market price of gold. The tracking error should therefore be low for the gold ETF as it will mean it is close to the real traded value of the gold. Thus, go for a gold ETF that has a low tracking error.
4. Minimum Investment: Gold ETF’s can be thus purchased from Rs 5000 to Rs 20000. Investors should therefore choose the ETF which is performing well and is within their purchasing capacity.
Taxation on Gold ETF
Gold ETF generally invest their corpus in physical gold. They track their price passively. Gains on selling the gold ETF are taxed similarly to the physical gold.
Short term capital gains are thus charged on units that are held for less than 36 months by adding it to the investor's income and taxing it as per their respective slabs.
In contrast, the Long term capital gains are charged on units held for more than 36 months at 20.8% with indexation benefits.
How to Invest in Gold ETFs?
Step 1: Investors should open a Demat account as well as a trading account online by submitting their PAN, ID proof, and residential proof, etc.
Step 2: They should then choose a Gold ETF and place their order. Subsequently, there is also an option to select mutual funds with an underlying gold ETF.
Step 3: You will consequently receive a confirmation sent to your email and your phone.
Step 4: Finally, a nominal brokerage fee will be deducted during your transaction.
ETF are Exchange Traded Funds that are basically listed on the stock exchanges, just like other stocks. Furthermore, it tracks the price of physical gold in the market. Subject to purchasing of new units as well as redemption of old units, there is continuous creation of new units. This, therefore, results in a change in the number of outstanding units.
Consequently, it keeps the market price of the ETF parallel to the NAV of the scheme. It is subsequently taxed as per the holding period. Long-term capital gains is charged at 20.8% with the benefit of indexation if the holding period is more than 36 months. It is therefore an attractive investment option for people with limited knowledge of the stock market. You must go through a list of guidelines before picking the right ETF for yourself.
Enter your details and request a FREE ADVISORY CALLBACK