{"id":8697,"date":"2010-02-24T04:17:21","date_gmt":"2010-02-24T04:17:21","guid":{"rendered":"https:\/\/www.amitbhawani.com\/blog\/?p=8697"},"modified":"2010-02-24T04:17:21","modified_gmt":"2010-02-24T04:17:21","slug":"investing-in-gold-the-etf-way","status":"publish","type":"post","link":"https:\/\/www.amitbhawani.com\/blog\/investing-in-gold-the-etf-way\/","title":{"rendered":"Investing in Gold the ETF Way"},"content":{"rendered":"

Introduction<\/strong><\/p>\n

Arjun is a worried father these days. His daughter\u2019s wedding is planned in the next 6 months. Over the last 2 years or so gold prices have soared from near about Rs 10,000 per 10 grams levels to Rs 17000+ levels. This frenetic rise in the prices of gold and that too in such a short period of time will leave any father worried whose daughter\u2019s marriage is round the corner. <\/p>\n

Gold as an Investment Asset Class<\/strong><\/p>\n

\"Gold<\/a>If you observe the way gold prices have behaved in the past decade you will be surprised. At the beginning of the decade in 2001 gold prices were hovering around Rs 4100 per 10 grams. Today as we near the end of the decade, gold prices stand at Rs 17,000 per 10 grams. This effectively means that in the last 9 years gold prices have more than quadrupled (multiplied more than 4 times). Had somebody invested in gold at the beginning of the decade by now he would have earned a handsome yearly return of 24-26%. This is much better than the returns given by PPF, NSC, Bank FD\u2019s and other Fixed Income Securities (Debt Instruments). These high returns make a very strong case for gold as a good long term investment. Gold can be looked as an investment for long term wealth creation. Also in 2009 the price of gold increased by Rs 3,500 as compared to a year earlier from around Rs 13,500 and closed the year at around Rs 17,000 giving an annual return of 26% in 2009. As the demand-supply situation remains tight the prices are expected to rise further. We Indians are very fond of gold and hence India is one of the largest consumers of gold in the world. <\/p>\n

Accumulating Gold for Children\u2019s Wedding<\/strong><\/p>\n

In a common Indian wedding any family buys 25-30 tolas (250 \u2013 300 grams) of gold. If someone would have bought this quantity of gold at the beginning of the decade in 2001 it would have cost him Rs 1.2 lakh (300 grams @ Rs 4000 per 10 grams). But the same quantity of gold as on today will cost Rs 5.1 lakhs (300 grams @ Rs 17000 per 10 grams). To bear such a huge bill only for gold is bound to burn a big hole in any father\u2019s pocket. If Rs 5 lakhs is spent only on gold how will the family manage the other expenses related to the marriage???????? Many parents will face this situation in future the way gold prices are soaring and making new highs with every passing day. <\/p>\n

Even after reaching these levels the price of gold shows no signs of relenting or stopping due to the tight demand-supply situation and international events which are beyond the control of the common man. From hereon where will gold prices head in the next 5-10 years no one knows? But like this decade, in the next decade also if prices of gold quadruple from today\u2019s levels it will surely leave many more fathers like Arjun fuming. We are not trying to predict the direction of gold prices in the next 5-10 years. Nor are we trying to scare you. Relax \u2026\u2026\u2026.. we are just trying to make you better prepared as a parent in case such an eventuality happens. <\/p>\n

Little bit of smart planning can help you reach your target of 25-30 tolas of gold for your children\u2019s wedding; irrespective of the gold prices; by the time your children reach the age of marriage. Interested in knowing how???? Gold ETF (Exchange Traded Fund) is the simple answer. Through this product you can accumulate as little as 1 gram of gold every month.<\/p>\n

Let us come back to Arjun\u2019s case. Had he started accumulating 1 gram of gold every month through a gold ETF mutual fund since the time his daughter was born, it would have taken him 300 months to reach his target of 300 grams of gold. Now 300 months translated into years comes to 25 years. This effectively means that by the time Arjun\u2019s daughter reaches the marriage age (average marriage age is 25 years) he is ready with the gold required for her marriage. At today\u2019s prices, 1 gram of gold will cost Arjun a monthly investment of Rs 1700 which is within the reach of common man.
\nDoes reaching the gold target before time or by the time your daughter reaches marriage age, sound heartening? Interested in knowing more about gold ETF\u2019s? . Yes, with gold ETF\u2019s you can accumulate as low as 1 gram of gold every month in electronic format in your demat account just like equity shares without having to worry about safety aspect (where to keep physical gold safely) and without worrying about the quality of gold and other many other features. That\u2019s the beauty of this product. So let\u2019s explore this product. <\/p>\n

Gold Exchange Traded Funds (ETF)<\/a><\/strong><\/p>\n

Demat Trading of Gold ETF Units<\/a><\/strong><\/p>\n

Physical Gold Buying V\/s Gold ETF<\/a><\/strong><\/p>\n

Companies offering Gold ETF\u2019s in India<\/strong><\/p>\n

So after reading the advantages of investing in gold through gold ETF\u2019s over traditional ways, if you are convinced the next question that will come to your mind is from where can I buy gold ETF\u2019s? Presently there are 5 companies that offer gold ETF\u2019s. These are as follows<\/p>\n

1. UTI Gold ETF \u2013 GOLDSHARE
\n 2. Benchmark Gold ETF \u2013 GOLDBEES
\n 3. Reliance Gold ETF \u2013 RELGOLD
\n 4. Kotak Gold ETF \u2013 KOTAKGOLD
\n 5. Quantum Gold ETF (one unit is half gram) – QGOLDHALF<\/p>\n

Apart from Quantum Gold ETF in case of all the other four gold ETF\u2019s one unit is equivalent to 1 gram of gold. All the 5 gold ETF funds are listed on the stock exchange. The units of any of these gold ETF\u2019s can be bought through a stock broker.<\/p>\n

Gold ETF\u2019s are very popular in the international market. SPDR Gold ETF is the world\u2019s largest gold ETF. Another example of international gold ETF is iShares Comex Gold Trust. <\/p>\n

Taxation of Gold ETF\u2019s<\/a><\/strong><\/p>\n

Conclusion<\/strong><\/p>\n

We have seen how gold can be accumulated through gold ETF units for long term wealth creation or for financial goals like accumulation gold for daughter\u2019s wedding. Even today maximum people in India buy gold the traditional way in the form of jewellery or pure gold. Gold ETFs and Gold Futures are a recent phenomenon although they are fast catching up as the awareness of these products increases among the masses.<\/p>\n

Fathers like Arjun which we saw at the beginning of the article, can accumulate gold through gold ETF units over a period of time for their daughter\u2019s wedding or son\u2019s wedding by investing some amount on a monthly basis in a gold ETF fund. He can keep accumulating one gold ETF unit (1 gram) every month regularly from the time the daughter\/son is born. His purchase costs will get averaged out over a period of time. Through gold ETFs a person can accumulate as little as half a gram or one gram of gold every month. By the time the child reaches marriage age in 25 years i.e. in 300 months the father would have accumulated 300 grams of gold. And finally when the marriage event happens just before that the father can sell all the gold ETF units at one go and buy physical gold or jewellery in bulk from the market for the marriage. So in this way a little bit of smart planning can save the father from the last minute rush for buying gold for the child\u2019s marriage at exorbitant prices which can burn a big hole in his pocket. At the same time the father can realize the dream of having a Lavish Big Fat Indian Wedding for the son\/daughter. <\/p>\n

To conclude, whatever be the reason for buying gold and in whatever form, it should form 10-20% of a person\u2019s investment portfolio be it in the form of jewellery, biscuits, bars, coins, ETF units etc after all we Indians love our gold; don\u2019t we????<\/p>\n

So Happy Gold Investing. Source – Email<\/p>\n","protected":false},"excerpt":{"rendered":"

Introduction Arjun is a worried father these days. His daughter\u2019s wedding is planned in the next 6 months. Over the last 2 years or so gold prices have soared from near about Rs 10,000 per 10 grams levels to Rs 17000+ levels. This frenetic rise in the prices of gold and that too in such […]<\/p>\n","protected":false},"author":1,"featured_media":19636,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"_genesis_hide_title":false,"_genesis_hide_breadcrumbs":false,"_genesis_hide_singular_image":false,"_genesis_hide_footer_widgets":false,"_genesis_custom_body_class":"","_genesis_custom_post_class":"","_genesis_layout":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[1310],"tags":[],"class_list":{"0":"post-8697","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-guides","8":"entry"},"aioseo_notices":[],"jetpack_featured_media_url":"https:\/\/i0.wp.com\/www.amitbhawani.com\/blog\/wp-content\/uploads\/2010\/12\/Gold-Investment-ETF-150x150.jpg?fit=150%2C150&ssl=1","jetpack_sharing_enabled":true,"jetpack-related-posts":[{"id":8705,"url":"https:\/\/www.amitbhawani.com\/blog\/physical-gold-buying-vs-gold-etf\/","url_meta":{"origin":8697,"position":0},"title":"Physical Gold Buying V\/s Gold ETF","author":"Amit Bhawani","date":"February 24, 2010","format":false,"excerpt":"Since years people have been buying gold the traditional way in the form of jewellery or gold biscuits and coins. 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