Gold has been a popular investment choice across the world. Many people's investing portfolios include it by default. It is not only a safer investment than stocks, but it is also utilised as a hedging asset to protect against market volatility.
Investing in gold may be done in a variety of ways. It may be purchased either physically or online, with or without the added danger of theft. Investing in gold through gold exchange-traded funds (ETFs) and gold mutual funds is becoming increasingly popular.
Gold ETF-
As opposed to genuine gold, gold ETFs (exchange-traded funds) are an easier and more convenient option to invest in the precious metal. The gold price is directly reflected in the price of each gold ETF unit, thus there are no hidden expenses. In contrast to actual gold, the price of gold ETFs does not fluctuate based on the state in which they are exchanged.
The fund manager purchases gold and deposits it with the custodian of the ETF. An ETF's price and return are identical to that of actual gold. When compared to buying gold bars, the costs of investing in a gold ETF are far more manageable.
It is appropriate for those who are purchasing gold primarily for financial purposes, and not for personal usage.
Gold Mutual Fund-
Mutual funds that invest in gold ETFs are called gold mutual funds. The performance of the ETF, which in turn depends on the performance of gold, influences the returns of the mutual fund. That affects the NAV of a gold fund.
Like ETFs, one unit here does not denote one gram of gold. Other ETFs or securities can also be used to diversify one's gold fund portfolio.
Gold ETF vs Gold Mutual Fund:
If you want to invest in gold mutual funds but not in gold ETFs, you must open a Demat account first.
Since 1 unit of gold ETF equals one gram of gold, the minimum investment in a gold ETF is the price of 1 gram of gold at any given time. Gold mutual funds, on the other hand, need an initial commitment of 1000.
Gold ETFs are traded on the stock exchange and their prices may be seen in real time, whereas gold mutual funds' prices are decided by their Net Asset Value (NAV).
Gold mutual funds invest in gold ETFs, whereas gold ETFs invest in gold.
Gold ETFs can only be purchased with a single amount, whereas gold funds can be purchased with either a lump money or a SIP. They do not have a SIP option.
Unlike gold mutual funds, gold ETFs do not charge an exit load.
Gold ETFs are more liquid than gold mutual funds. Only after the market closes may you redeem units of gold money.
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