Gold Exchange Traded Funds (ETF)
Not only is buying gold considered auspicious in Indian culture; it is also regarded as a secure investment avenue.
Traditionally we buy gold in the form of jewelry or gold bullion. While gold jewelry loses some value during resale due to making charges; handling, storage and security become problems when large quantities of gold bullion is concerned.
We now have a new simpler way of buying gold – the Gold Exchange Traded Fund (ETF).
Gold ETFs are open-ended Mutual Funds that invest in Standard Gold Bullion of 99.5% purity. Instead of buying physical gold bullion, you can buy units of Gold ETFs that are equivalent to buying the real thing. The units you buy are stored in your demat account. This is why Gold ETFs are also called ‘Paper Gold’.
Units of Gold ETFs are listed on the stock exchange and they rise and fall as per the trends in the spot market for physical gold.
Why Invest In Gold?
In India, gold is one of those rare commodities that have consistently beaten the trends in the international market for nearly a decade now and given high returns on investment. It has the ability to withstand market highs and lows, compared to other investment types. This long-term wealth generation capacity and resilience to market changes make gold a necessary part of your portfolio.
- Convenience of gold investing
- Easy entry and exit
- Cost efficient
How to invest in Gold ETFs?
- Open a Kotak Securities online trading account and demat account
- Place an order to buy a specified number of units of Kotak Gold ETF units by logging into your account on our website – www.kotaksecurities.com
- The cost of the ETF units is automatically debited from your account and your demat account is credited with the specified number of Gold ETF units.
- You can also place orders for Gold ETFs at your nearest Kotak Securities branch or with a Kotak Securities dealer.
What are the benefits?
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Security
No more worries about theft of physical gold. Your gold purchases are safely stored away in your Kotak Securities Demat Account. -
Liquidity
You can buy or sell Gold ETFs at a moment’s notice on the Kotak Securities website or through your Kotak dealer. Perfect for emergencies, when you do not have the luxury to hunt for a buyer for your physical gold. -
Quality control
There’s no 100% guarantee of the purity of the gold that you buy at your local jeweler. However, with Gold ETFs this becomes a non-issue as Gold ETFs invest in 99.5% pure gold only. -
Cheaper
Physical gold comes with making charges that can’t be recovered, the cost to securely store it and also the cost to insure it. These factors limit the amount of physical gold you can own. With Gold ETFs, the costs of buying and selling are much lower and there is no cost of storage or security involved. -
Diversify your portfolio
As mentioned earlier, gold brings stability and assured returns to a portfolio. Use it to hedge your risks on the equities, derivatives and mutual funds in your portfolio. -
Save on Wealth Tax
Physical gold attracts the tax man in the form of Wealth Tax. You will not have this problem with Gold ETFs. -
Long Term Capital Gains Tax
You need to pay Long Term Capital Gains Tax on physical gold 3 years after the date of purchase. In the case of Gold ETFs this period is reduced to just 1 year.
+ Expand AllFrequently Asked Questions (FAQs)
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QWho is eligible to invest in Gold ETFs?A
Following categories are eligible for investment in ETFs:
- Individuals (Residents/NRI (NRE & NRO both)
- Corporates
- Institutions
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QWhat are the costs involved in buying / selling a Gold ETF?ASince ETFs are listed & traded on exchange, the cost to an investor accrues only in the form of brokerages, management fees & taxation.
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QWhat are the taxation effects of trading in Gold ETFs?A
Please note below the tax implication associated with investment in ETF:
Parameter Gold ETF Index ETF International ETF Sector Specific ETF Wealth Tax Nil Nil Nil Nil Short Term Capital Gains Tax As per the Income Tax Slab 15% As per the Income Tax Slab 15% Long Term capital Gains Tax 10% without indexation or 20% with indexation Nil 10% without indexation or 20% with indexation Nil Securities Transaction Tax (STT) Nil 0.125% * Nil 0.125% *