Gold MF vs Gold ETF: In India, gold isn’t merely a metal; it’s a emotion. Whether it’s for weddings or as an investment, the shine of gold never diminishes. With the recent decline in gold prices, a lot of folks are starting to think about buying it or investing in it. However, times have shifted, and rather than keeping gold locked away in a safe, people are opting for digital gold, like Gold ETFs or Gold Mutual Funds. So, the big question is, which of these two choices is more lucrative?
What is Gold ETF?
A Gold ETF (Exchange Traded Fund) is an investment vehicle that tracks the price of physical gold. This means that when the price of gold rises, the ETF’s value also increases, and when gold prices decline, its value also decreases. Each ETF unit is equivalent to 1 gram of 99.5% pure gold.
A demat account is required to invest in them, as they are bought and sold on a stock exchange like shares. The advantage is that you don’t have to worry about storing your gold at home, and there are no concerns about theft or purity.
What is Gold Mutual Fund?
Gold Mutual Funds are a good option for those who don’t want to open a demat account. These funds invest directly in gold or in Gold ETFs. This means you are investing in gold indirectly through mutual funds. You can start investing with small amounts through SIPs (Systematic Investment Plans), making it much easier for beginning investors.
Difference between cost and fees
The expense ratio of gold ETFs typically ranges from 0.4% to 0.7%, which is lower than that of mutual funds. However, demat account fees and brokerage charges are also included. On the other hand, gold mutual funds have higher expenses, ranging from 0.8% to 1.5%. This includes charges such as fund manager fees, exit loads, and commissions. Therefore, ETFs are slightly cheaper in terms of cost.
Return Comparison – Who Gains More?
Data from the past 10 years shows that both Gold ETFs and Gold Mutual Funds have generated average annual returns of approximately 13-14%. The only difference is that ETFs tend to have slightly better net returns due to their lower expense ratio. This means that if you are investing for the long term, Gold ETFs may offer a slight advantage.
Which is the right option for you?
If you can easily trade in the stock market and have a demat account, a gold ETF may be a good fit, offering low expenses, real-time trading, and good returns. However, if you’re a new investor and want to invest a small amount each month, a gold mutual fund may be easier and more convenient.
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