For quite a few time, Gold has long been seen as a reliable asset and a solid way to guard against inflation risks. However, as times change, fewer people are leaning towards physical gold. Instead, many are opting for financial gold, like Exchange Traded Funds (ETFs). Investing in ETFs can yield better returns than traditional gold, plus you can benefit from long-term capital gains tax exemptions.
So, what exactly are ETFs? They’re financial instruments tied to gold, available as mutual funds or exchange-traded funds. Essentially, ETFs represent a digital version of gold, often referred to as financial gold. According to the Association of Mutual Funds in India, there was a whopping 216% increase in ETF net inflows in 2024.
How do you buy and sell them? ETFs track the prices of physical gold, and you can trade them on the stock exchange anytime. The cool part is that you won’t have to pay any making charges, which are typically around 12 to 15% when buying gold jewelry.
And what about capital gains tax? If you hold your ETFs for over 12 months, you get a 12.5% indexation benefit on long-term capital gains, down from the previous 20%.
There are 5 different types of ETFs
Gold ETFs, or Gold Exchange Traded Funds, let investors trade gold electronically. They’ve been available in India since 2007 and are regulated by the NSE and BSE.
Index ETFs track indices like Nifty or Sensex, so their prices move in sync with those indices. Currency ETFs allow you to get involved in the currency market without actually buying a specific currency.
Bond ETFs invest in bonds that correspond to their underlying index. On the other hand, sector ETFs focus solely on stocks and securities from a particular industry.
So, what are the perks of ETFs? You can keep an eye on gold prices by trading ETFs just like stocks. They offer daily investment updates, making everything more transparent. Plus, they’re super easy to buy and sell, and you can diversify your investments across various sectors. Another bonus? There’s no income tax on ETF dividends, and their expense ratios are generally lower than those of mutual funds.
Desclaimer: For any financial invest anywhere on your own responsibility, Times Bull will not be responsible for it.