Gold ETF: Make more money, know these top 5 investment tips to get maximum gains

Gold ETF: Good news for investors of Gold ETFs! The shine in this gold investment instrument is only increasing by the day. The investment in Gold ETFs in January have increased by over 45 per cent from the December, 2020 levels. Is it right time to invest in Gold ETFs? What are the advantages and disadvantages in this? Here is what you must know! 

In chat with Zee Business’ Swati Raina, expert Amit Kukreja has some top Gold ETF investment tips.

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Why to invest in Gold ETFs? 

Kukreja said that portfolio diversification is very important. Whenever financial markets have crashed, Gold has come to the rescue. Inclusion of Gold related investments in portfolio is a sign of maturity on the part of investors, he said. Total investment in Gold ETF in January and December is Rs 1055 cr. It has gain traction amid the coronavirus pandemic. 

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How to buy Gold ETFs 

It is a financial asset which can be purchased by anybody who has a Demat Account. It is a paper asset which does not have the obligation of holding the gold physically. It can be invested in the form of SIPs. At least one unit has to be purchased. 

Advantages of Gold ETFs 

Gold ETF is a financial asset which can be bought or sold at any time, Kukreja said. Sovereign Gold Bond (SGB) is also good option but it can be bought only when the government issues it. It also has a lock-in period. The Gold ETFs are preferred because of the liquidity factor over the Gold bonds. It gives good returns over a long term period. 

Tax Implications on Gold ETFs 

In Gold ETFs there is a long term capital gains after holding it after a period of 3 years. In less then three years, short term capital gains tax is applicable. So, it has a liquidity aspect but is not as efficient as SGBs in terms of tax. If one has to avail the tax efficiency of capital gains tax, then the investor must hold it for 3 years. 

What to keep in mind? 

Investors should know this important point about expense ratio. Kukreja said that the expense ratio is a very integral part of fund management. One cannot optimise it beyond a point. One has to keep this in mind that an investment is not made into that small gold fund to keep expense ratio low where liquidity is low. The expense ratio should not be seen and the total Asset Under Management should also be seen. The liquidity option should also be seen.  

Other important tips 

The expert said that the investors should not apply for many bids and instead buy it at market price. This investment should be periodically reviewed. He said that the exposure of gold investment in portfolio should not be above 15 per cent.