By Tory Vance
Gold has always been a favourite investment option for Indians, as it helps with portfolio diversification and hedges against inflation. However, physically holding gold can be risky and incur costs such as making, interest, and storage charges. This is where gold exchange-traded funds or gold ETFs, come in as a better alternative. Gold ETFs allow investors to invest in gold without actually buying physical gold.
What are gold ETFs?
A gold ETF is a type of exchange-traded fund that tracks the price of gold and reflects the performance of gold in the market. Gold ETFs are traded on stock exchanges and make it simple for investors to invest in gold without having to worry about buying and storing physical gold.
When you invest in a Gold Exchange Traded Fund, your money is invested in gold bars stored in vaults. Gold ETFs offer investors exposure to gold prices while providing the convenience, transparency, and lower costs associated with investing in mutual funds.
Top Gold ETFs to invest in India
Here are the best-performing gold ETFs in India based on criteria like asset size, returns, and track record:
- ICICI Prudential Gold ETF
ICICI Prudential Gold ETF is a popular option with over Rs 4,912.20 crore in assets as of August 8, 2024. Since its inception in 2010, it has generated returns of around 7-8% annually for its investors by closely following domestic gold prices. Its expense ratio is a low 0.5%.
- Nippon India ETF Gold BeES
Launched in 2007, Nippon India ETF Gold BeES is the largest gold ETF fund in India with over Rs 11,144.51 crore in assets as of June 28, 2024. It has consistently outperformed other funds by tracking domestic gold prices closely. Its expense ratio of 0.79% makes it cost-effective for investors looking to invest in ETFs.
- HDFC Gold ETF
HDFC Gold ETF comes with a relatively low expense ratio of 0.59% and has strong assets of Rs 5,075.77 crore as of July 31, 2024, indicating investor confidence. Launched in 2010, this ETF has proved its reliability in consistently tracking domestic gold prices over many years.
- Axis Gold ETF
Axis Gold ETF has Rs 922.31 crore in assets as of June 30, 2024, and has delivered consistent annualised returns over the years.
Conclusion
Gold ETFs have emerged as a preferred route for Indians to invest in gold due to the various benefits they provide over physical gold. By understanding the basics of gold ETFs, evaluating top funds based on size, returns and tracking ability, and reviewing investing processes, investors can wisely choose where to invest their capital for true gold exposure and risk diversification. Having exposure to gold, in addition to equity and debt, is recommended given that each of these three asset classes comes with a different risk-return profile and is impacted by different factors. The exact allocation for each asset class, including gold, would depend on an investor’s risk profile, investment objectives, and current portfolio.
