Top Gold ETFs in India

Exchange-traded funds (ETFs) have become popular as an investing option in India because of their affordability, transparency, and liquidity. Gold is a safe-haven asset that provides stability during inflation and financial turbulence. This article examines India’s top gold exchange-traded funds (ETFs) and their benefits and potential applications in your investment portfolio.

What Are Gold ETFs?

Exchange-traded funds (ETFs) invested in gold bullion are known as gold ETFs. Without requiring investors to hold physical gold, these exchange-traded funds (ETFs) provide exposure to the price of gold by trading on stock markets like ordinary shares. Usually, each unit of a gold exchange-traded fund (ETF) represents a gram of gold or a fraction of it. Investors can profit from price growth and liquidity by purchasing gold exchange-traded funds (ETFs) without worrying about storage, purity, or insurance expenses.

Why Invest in Gold ETFs in India?

Gold has historically been a crucial part of an Indian investment portfolio due to its cultural significance and financial stability. Here are a few reasons why investing in gold ETFs can be advantageous:

• Diversification: Gold ETFs provide portfolio diversification by reducing overall volatility. Gold often performs well when other asset classes, like equities, perform poorly.
• Liquidity: Unlike physical gold, gold ETFs can be bought and sold on stock exchanges at prevailing market prices, providing high liquidity.
• Transparency: Gold ETFs offer transparency in pricing as they directly reflect the market price of gold.
• No Storage Hassle: Gold ETFs eliminate the need for physical storage, reducing concerns about theft, storage costs, and insurance.
• Tax Efficiency: Gold ETFs are tax-efficient compared to physical gold, particularly regarding long-term capital gains tax.

Top Gold ETFs in India

India offers several reliable and popular gold ETFs that have proven to be consistent performers.  Let’s look at some of these options available to investors.

1. Nippon India Gold BeES

Nippon India Gold BeES is one of the top gold ETF India. It aims to provide returns that closely correspond to the performance of gold.

• Expense Ratio: Low compared to peers
• Liquidity: Highly liquid with strong trading volumes
• Investment Objective: Tracks the domestic price of gold

2. HDFC Gold ETF

HDFC Gold ETF is another prominent player in the gold ETF space. It provides an efficient way of investing in gold without the burden of storage and security.

• Expense Ratio: Competitive
• Liquidity: Good trading volumes
• Investment Objective: Mirrors the performance of gold prices

3. SBI Gold ETF

SBI Gold ETF is backed by one of India’s largest public sector banks. The fund offers a convenient way to invest in gold.

• Expense Ratio: Moderate
• Liquidity: Adequate liquidity
• Investment Objective: Provides returns equivalent to gold prices

4. ICICI Prudential Gold ETF

ICICI Prudential Gold ETF offers a secure and cost-effective way to invest in gold. It is known for its robust performance and reliable management.

• Expense Ratio: Low
• Liquidity: Good liquidity with consistent trading volumes
• Investment Objective: Tracks domestic gold prices

5. Kotak Gold ETF

Kotak Gold ETF is a reliable option for investors looking to include gold in their portfolio without holding the physical asset.

• Expense Ratio: Low to moderate
• Liquidity: Decent liquidity
• Investment Objective: Reflects gold price movements in India

Recommended read- How to Invest in Gold ETFs?

How to Choose the Top Gold ETF in India

When selecting the top gold ETF in India, it is essential to consider several factors to ensure that the investment aligns with your financial goals.

• Expense Ratio: The expense ratio reflects the annual fee charged by the fund for managing your investment. A lower expense ratio is preferable as it directly affects your net returns.
• Liquidity: High liquidity ensures you can easily buy or sell units without significantly impacting the price.
• Fund Size: A larger fund size indicates investor confidence and ensures efficient fund management.
• Tracking Error: Tracking error measures how closely the ETF follows the price of gold. A lower tracking error indicates better performance.
• Historical Performance: While past performance doesn’t guarantee future returns, it provides insights into how the fund has managed market volatility.

Advantages of Investing in Gold ETFs

Investing in gold ETFs offers several advantages over other forms of gold investment, including physical gold and gold mutual funds.

• No Storage or Security Issues: No risk of theft or need for secure storage
• Transparency: Prices reflect real-time market prices of gold
• Ease of Trading: Can be bought and sold on exchanges during market hours
• Tax Efficiency: Lower taxes on long-term capital gains compared to physical gold

Risks Involved in Gold ETFs

While gold ETFs provide numerous benefits, there are some risks investors should be aware of:

• Market Risk: Gold prices can be volatile, affecting the ETF’s value.
• Tracking Error: Minor differences between gold prices and ETF returns can arise.
• Liquidity Risk: Some gold ETFs may have lower trading volumes, making it challenging to execute large transactions.

Tax Implications of Gold ETFs in India

Gold ETFs are subject to capital gains tax in India. The tax treatment is as follows:

• Long-Term Capital Gains (LTCG): Gains from units held for over three years are taxed at 20% with indexation benefits.
• Short-Term Capital Gains (STCG): If units are sold within three years, gains are added to income and taxed as per the investor’s income tax slab.

Future Outlook of Gold ETFs in India

With increasing economic uncertainties and market volatility, gold ETFs are expected to remain a popular investment option. As more investors seek safer avenues to diversify their portfolios, gold ETFs provide an accessible and reliable investment vehicle.

Conclusion

An intelligent, transparent, and affordable option to invest in gold without the inconveniences of physical ownership is through gold exchange-traded funds (ETFs) in India. Various options accommodate different investment tastes, including Nippon India Gold BeES, HDFC Gold ETF, SBI Gold ETF, ICICI Prudential Gold ETF, and Kotak Gold ETF. When choosing the top gold ETF, consider fund size, tracking error, liquidity, and fee ratio. Gold ETFs can hedge against inflation and offer stability during market turbulence when included in a well-diversified portfolio. Gold ETFs can complement any long-term financial plan with due diligence and disciplined investing.