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What Are Gold ETFs?

Read this to know more about Gold ETFs. Understand the benefits and risks of Gold ETFs. Know how you can invest in digital gold using Cube.
December 21, 2020

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Most investors may be unaware of the fact that you don’t have to physically own gold to invest in it. With the modern age of technology and free markets, digital gold and especially Gold ETFs have become a popular investment choice compared to gold. 

Gold Exchange Traded Funds are open-ended mutual fund schemes that aim to track the domestic prices of physical gold. It is a passive income investment that invests in gold bullion and is based on gold prices.  

The Benefits Of Gold ETFs

1. No Entry And Exit Load

Gold ETFs do not come with an entry or exit load. This means that the investor is not charged when buying or selling their funds. Investors only have to pay up to 1% brokerage on their transactions

2. Lower Market Risk

Gold prices often remain steady and do not fluctuate violently. This prevents investors from facing huge losses even when their returns decrease by a large margin, making it a low-risk investment.

3. Liquidity

Gold ETFs provide higher liquidity compared to physical gold and are backed by high-value gold. Additionally, the transactional fees of gold ETFs are lower than those of physical gold.

The Risks of Gold ETFs

1. Less Overall Returns

With fund management and brokerage fees required to be paid, the total returns received from gold ETFs would eventually be lesser than that of physical gold.

2. Cannot Be Redeemed As Gold

Gold ETF units can not be redeemed as gold, only as cash. This does make it safer, however, as there is no looming risk regarding the safety of the gold. But in order to trade Gold ETFs, you would have to open a Demat account and pay its yearly fees.

How Are Gold ETFs Different To Digital Gold?

Investment platforms like Cube Wealth allow you to buy gold online in any quantity you’d like with the assured purity. This is known as digital gold backed by our partner, Safegold. Digital gold allows investors to buy gold at denominations as low as 1g. 

Digital gold by Safegold is comparatively less expensive than Gold ETFs. It avoids the hassle of having to pay commission, brokerage or fund management fees making the total returns greater than that of Gold ETFs. At the same time, Gold ETFs can give lucrative returns and can even become a passive income generating option through dividends.

In order to know the value of your Gold ETF investment, an investor would have to look at the net asset value of their fund. However, with digital gold, the value is that of the current gold price. 

Summary

Gold ETFs are one of the easiest ways to invest in gold bullion. But there are only 13 Gold ETFs in India and the limited options may or may not suit every investor.

If the digital way of investing in gold interests you, the other option you would be Digital gold by Safegold that you can invest in using the Cube Wealth app. Download the Cube Wealth app or Speak to a wealth coach to know if you should invest in Digital Gold today.

Watch this video to know more about alternative investment options



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