Do you, like most Indians, cherish that yellow metal – Gold? Do you enjoy showing off your collection of trendy, designer gold jewelry at parties? Or are you the kind of buyer who'd rather have a stash of sovereigns in the bank? Either way, it may be time to consider a change in your traditional methods of investing in gold.
Many NRIs buy gold, only to deposit it in lockers in India. But the World Wide Web is changing the old ways of buying and storing gold. Gold Exchange Traded Funds (GETFs), launched by mutual funds, now make it possible to make online investments in gold.
Some popular funds of this nature are UTI's Goldshare and Benchmark AMC. Both are listed on the National Stock Exchange (NSE).
How do I buy gold through a GETF?
A GETF enables you to buy gold from the bullion market. Each unit of the fund represents one gram of gold. So by buying units of the fund you're essentially buying gold worth the investment amount, which is deposited with a custodian such as a bank or a financial institution.
The Net Asset Value (NAV) of a GETF is determined by prevailing gold prices. The NAVs of GETFs can be monitored on any NSE terminal.
What do I stand to gain?
- GETFs save you the charges and insurance cost associated with gold deposited in a locker.
- ETFs are exempt from wealth tax, since they enjoy the same status as mutual funds.
- You invest in a high-quality product – these funds typically invest in imported gold that is 99.9% pure.
- GETFs are less volatile compared to the equity and bond market, and provide higher returns. Online investments in gold have provided 16% returns in the past five years.
- The tax benefits from investing in a GETF are higher than those from investing in a physical stock of gold.
- You save the premium you would pay if you were to buy gold from a bank or a jeweler. A premium of 20% is charged on purchases of small coins of five grams, and 5-10% on coins which weigh more than five grams. The reverse transaction – selling physical gold – also carries a cost. When you go to a jeweler to sell gold, it is valued at a discounted price.
- Trades on GETFs are exempted from the Security Transaction Tax.
Thus, purchasing gold has become easier and more profitable than ever before thanks to the Internet.
