The Gold BeES ETF is a passively managed open-ended ETF. Before expenses and other ETF-related charges, the fund's returns are comparable to gold returns. These are ETFs, which means they can be traded on a stock exchange. As a result, investors have the opportunity to trade the instrument during market hours.
What are the advantages of Gold BeES for Investors?
With Gold BeES, there are no issues with storage or theft. Similarly, unlike in the case of jewellery, investors do not have to pay for the extra cost of gold design. Another benefit of Gold BeES is that there is no risk of gold purity because Gold ETFs deal in 99.5 percent pure gold.
It is also the most widely traded and liquid form of gold investment. However, a demat account is required for holding and remaining invested in Gold BeES or Gold Benchmark Exchange Traded Scheme.
There is a variable entry load structure based on the investment amount during the NFO period.
In addition, unlike SGBs, gold BeES are available in large volumes due to the large volume, whereas SGBs are offered in tranches for a limited timeframe.
Gold ETFs and gold BeES do not have high margin costs, which range from 3 to 8% for physical gold.
A small amount of gold can be used for exposure. If gains on units are held for more than 36 months, long-term capital gains (LTCG) tax of 20% with indexation benefit applies to gold ETFs.
If gains on units are held for less than 36 months, short-term capital gains (STCG) tax is imposed at the investor's income-tax slab rate. Capital gains on SGBs sold in the secondary market are similar to this.
Transacting in Gold BeES has a cost
Trading in Gold BeES, like stocks, incurs a brokerage fee of 0.5 percent of the transaction value, which varies from broker to broker. 1 unit of Gold BeES is equal to 1 gramme of gold and can be traded by investors.
Prospects for Gold BeES
So, in times of uncertainty, such as the current one, one can rely on gold BeES as a perfect hedge and diversifier. Furthermore, because these BeES have a favourable cost structure, investors with long-term investment goals can stagger their investments into them.
When purchasing Gold BeES, there are a few things to keep in mind.
1. The assets under management of the fund, as well as the average daily turnover, should be considered.
2. Impact cost, which indicates how much liquidity the instrument provides.
3. The tracking error should be the smallest when compared to the gold benchmark.
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