However, capital markets regulator Securities and Exchange Board of India (Sebi) recently cautioned investors against investing in ‘digital gold or e-gold products’, which are being marketed as an alternative to investment in physical gold.
Instead, investors are advised to invest in gold ETFs that are offered by Sebi-registered intermediaries.
What are gold ETFs?
Offered by mutual funds, gold ETFs are financial instruments that are tradeable in stock markets and enable investors to get exposure to the precious metal.
There are 22 gold ETFs offered by fund houses with a total AUM of ₹1.02 lakh crore. These ETFs saw an inflow of ₹7,743 crore in October alone, according to the latest AMFI data. Inflows into gold ETFs continued for the third month in a row, taking the average AUM past the ₹1 lakh crore mark.
Meanwhile, another way to get exposure to gold is ‘sovereign gold bonds’ (SGBs), which are likely to be discontinued by the government.
Key things to know
I. In line with gold prices: One can choose any mutual fund to invest in a gold ETF without bothering about the returns since they all will rise in the same proportion as gold prices.
II. Trade in market: Being exchange traded, you can buy and sell these funds in the stock market. But you need to have a demat account to trade in them.
III. Income Tax: Capital gain on the sale of these assets is chargeable at 12.5% without indexation.
IV. No storage cost: Investment in these assets is considered better than investing in physical gold because this does not entail any storage cost or worries over safety.
Note: This story is for informational purposes only. Please speak to a SEBI-registered investment advisor before making any investment related decision.
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