Gold ETF vs. Gold ETF FoF: Back in the day, folks only bought physical gold, but things have evolved. Now, investors have smart and simple options like Gold ETF and Gold ETF FoF (Fund of Funds), which are super popular. Both let you invest in gold, but there are seven main differences in how they function. It’s important to grasp these differences before you decide to invest. Let’s dive into these differences and figure out which option suits you best.

How does Gold ETF work?

A Gold ETF is an investment choice that puts your money directly into physical gold. So, when you buy a Gold ETF, it’s like you’re actually buying real gold. But there’s a catch: you need a demat account to buy a Gold ETF since it trades like shares on the stock market.

What is Gold ETF FoF and how is it different?

A Gold ETF (FoF) operates a bit differently. Instead of investing directly in gold, it buys units of a Gold ETF. You don’t need a demat account for this one. Just like purchasing mutual funds, you can buy a Gold ETF (FoF) through an asset management company (AMC).

Minimum investment difference

Gold ETF: You can invest as little as 1 gram of gold.

Gold ETF FoF: Starts at just Rs 100. FoF is a more convenient and budget-friendly choice for smaller investors.

What is the difference between liquidity?

Gold ETF: It’s traded on the stock market, so its price is available in real-time. This means you can buy or sell it instantly, and its price fluctuates constantly.

Gold ETF FoF: It’s NAV-based, which means buying and selling happens at a fixed price once a day. So, you can only buy and sell at that set price for the day.

If you’re looking to buy or sell right away, then a Gold ETF is the way to go.

But which one has higher fees?

Gold ETF: You’ll face demat account and brokerage fees, but the other costs (known as the expense ratio) are pretty low.

Gold ETF (FoF): You won’t need a demat account for this one, but it does come with slightly higher costs since it invests in other ETFs. Plus, if you pull your money out early, there might be an exit load (penalty).

So, which option suits you best?

If you have a demat account and like trading in the live market, a gold ETF is perfect for you. On the other hand, if you want to invest without a demat account, use SIPs, or start with a small amount, then a gold ETF (FoF) is a better choice.