Why gold ETFs are better than physical gold
What's the story
With gold prices surging recently, several investors are considering their investment choices. Currently, 10g of 24K gold in India costs ₹86,793 while that of 22K is priced at ₹79,573. Despite a minor dip last week, the price is up by 2.2% for February. In such volatile markets, digital forms of investment like Gold ETFs (Exchange Traded Funds) are becoming more popular than traditional physical gold purchases.
Cost-effectiveness
Digital gold investment: A strategic choice
Sridaran Sundaram, a SEBI-registered investment advisor and founder of Wealth Ladder Direct, advocates digital gold investments over physical ones. He argues that investing digitally maximizes returns on growth by eliminating additional costs associated with physical gold such as making and storage costs. "When you want to make the most of gold investment, the only way to do it is by investing digitally," Sundaram states.
Benefits
Gold ETFs: A modern investment solution
A gold ETF is a fund that lets investors trade gold on a stock exchange, its value being linked to the price of gold. The advantages of investing in a Gold ETF are plenty. They are easily tradable, being exchange-traded funds (ETFs). Investors can buy or sell these funds in stock markets at their convenience, maximizing potential gains by selling them in the open market when desired.
Cost savings
No storage or making costs
Gold ETFs also remove storage costs of physical gold. As these funds are linked to your demat account, profits can be directly credited to your bank account. This saves you the cost of a bank locker, which could be around ₹5,000-7,000 per year. Further, buying digital gold in the form of an ETF removes worries over making costs usually involved with gold jewelry ranging from 15-20%.
Investment details
Accessibility and transparency
Gold ETFs also provide accessibility as they allow you to invest in smaller denominations. While one gram of physical gold costs around ₹8,600, you can buy digital gold through an ETF in very small denominations like ₹500-1,000. Also, the price of gold is pretty easy to track which adds to the transparency and lets you check your investment performance in ETFs easily.