Gold ETF versus Physical Gold

Online Mba India

Gold fondly known as the Yellow Metal is considered as one of the safe investment avenues since time immemorial. Gold either as ornaments, coins, or in any other form possesses a great importance. With the passage of time, its value has been observed to be incremental. Often considered as a liquid investment, individuals invest in gold for a variety of reasons. Some of these reasons include pledging gold to meet unforeseen expenses, accumulating wealth, gifting it to their kith-and-kin on special occasions, etc. Even most country’s Governments have their reserves in Gold.

Though physical gold has a lot of benefits, it also has certain drawbacks associated to it. One such reason is its security and safety. Physical gold requires space where it can be kept. Individuals by and large prefer lockers in banks, financial institutions, or other security organizations where their investment can be safeguarded. This is because individuals perceive it to be a risky proposition to keep physical gold at home. In order to overcome such shortcomings, Gold ETFs (Exchange Traded Funds) were launched in India. The idea of such ETFs was first conceptualized in May 2002, by Benchmark Asset Management Company Pvt. Ltd. The company did not get an approval at first, but eventually it was launched in 2007. This concept today has become a popular investment haven.

What is a Gold ETF? They are also referred as Paper Gold. It is an investment product whose value is determined with the help of underlying gold assets. These products are traded on the stock exchanges and they represent ownership in the underlying gold value. The primary intention to invest in this avenue is to earn returns due to the movements in the physical gold prices. It also gives an easy, affordable, and safe approach to enter in the gold markets. Each of its unit is approximately equal to one gram of physical gold.

How is Gold ETF different from Physical Gold? It offers a varied range of features which are as follows:
•It is easy to acquire and sell such investments as compared to physical gold at the real time prices.
•In case of Gold ETFs, difficulties like its protection and safeguarding are eliminated. Accordingly, individuals can save the locker charges paid to banks and other institutions.
•Investment value can be tracked on a real-time basis.
•Problems regarding making charges, wastage of gold, etc., are avoided.
•It is a tax efficient technique to hold Gold ETFs and avail benefits of long-term capital gains.

Which one to choose? Individual investors in India can purchase gold in both physical as well as ETF form. However, one must identify the reasons before purchasing them. For example, if an individual has an actual use of gold such as making ornaments, gifting it to someone, etc., then physical gold should be purchased. However, individuals should opt for Gold ETFs if they wish to diversify their portfolio, have gold as an asset class in their portfolio, etc. As a consequence, it is an individual’s choice and requirements that makes a particular decision.

In order to make such investment related decisions, individuals need to identify the various factors that can affect them. This knowledge can be gained with the help of professional programs that are being offered by various universities and institutions. The Online MBA program offered by ITM University Online covers the various aspects of the different investment classes. This helps students to understand their features and take decisions accordingly in both professional and personal front.