How to Invest in Gold ETFs

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Gold ETFs offer a great alternative to owning physical gold

TLDR Points

• ETFs stand for exchange-traded funds that can be bought and sold like stocks
• Gold ETFs are a great way to invest in gold without actually buying the metal
• Returns on these ETFs are based on movement in gold prices
• Gold ETFs can be bought and sold like other ETFs

Introduction

All that glitters is not gold; some are gold ETFs. If you want to invest in the yellow metal but don’t want to risk holding it physically, gold exchange-traded funds are a great option.

Gold ETFs are mutual funds that invest in gold bullion.  When you buy one unit of a gold ETF, you are purchasing the equivalent of one gram of gold. The gold ETF tracks the price of gold, and the value of your holdings rise and fall along with the price of the metal.

This blog will tell you all about gold ETFs and how to invest in a gold ETF.

What is a gold ETF?

Unlike regular mutual funds, which you need to redeem through the fund house, you can buy and sell ETFs directly on the stock exchanges much like individual stocks.

ETFs invest in a variety of securities and commodities. Gold ETFs invest specifically in the yellow metal.

How to purchase a gold ETF?

Gold ETFs are like the share of a company that you can buy off the stock exchange. You can ask your broker to make the purchase or sale on your behalf. You can also do it yourself online. All you need is a trading and Demat account to buy and sell gold ETFs. If you are already buying and selling stocks, then buying ETFs is simple.

Here’s how to buy gold ETF online?

1. Log in to your account
2. Browse through Gold ETF options and choose the one you want to buy
3. Place your order
4. Authorise payment through your linked bank account
5. The units of the gold ETF are credited to your Demat account

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Why should you buy a gold ETF?

ETFs are one of the most efficient ways of diversifying your investment portfolio. Gold ETFs are safer than investing in coins and jewellery. You can enjoy the benefits of investing in gold without having to worry about the safety of your valuable possessions.

Buying and selling gold via an ETF is also far more convenient than buying physical gold. The pricing is transparent, and you don’t have to worry about the quality of the gold.

Finally, since ETFs are passively managed funds, they have a lower expense ratio than other funds.

Conclusion

Gold has been a favourite among Indians as an asset. Gold is a good store of value, provides diversification to your portfolio and is a reliable hedge against inflation. However, physical gold is cumbersome to own. Gold ETFs provide the perfect solution to this problem.

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