INVESTORS PLEASE LISTEN !: Is Gold funds Better than gold?

Tuesday, April 14, 2009

Is Gold funds Better than gold?

Posted By - IndianMoney.com Research Team- On-13/04/09

Gold is being more and more recognised as an asset class worth investing in.Now you can buy substantial gold by investing in Gold Exchange Traded Funds (ETF) launched by mutual funds. When you own units, you in a way buy gold value that amount and deposit it with a custodian.

The Net Asset Value (NAV) of gold is determined by gold prices. Every unit represents one gram of gold. These funds have been scheduled on the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE), and it's possible to buy and sell these units just like shares through a demat account.

Gold exchange traded funds set aside charges on locker facilities and insurance. As far as extra expenses related to gold ETFs are alarmed, it is not likely to exceed 2.25%. Newly launched funds charge an extra 1%. They are also accepted from wealth tax. Gold ETFs invest in imported gold that is of 99.9% pure.

In recent times, gold exchange traded funds have been launched by UTI Mutual funds and gold mutual funds in the market. Many other mutual fund companies also have plans to launch similar funds in the near future.

People who might have otherwise bought physical gold coins or bars, but was willing to have the same thing with more convenience, are buying physical gold by investing in gold ETF. Gold ETFs have performed very well in the past four years in other countries. Awaiting 2003, it was hardly recognised as an asset class. In the past four years, 700 ton gold worth 13 billion dollars has been invested in gold ETFs.

Formerly, pension funds, hedge funds etc, did not invest in gold and never even thought of investing in them as an asset class.Now with the commence of gold ETFs, more people have started investing in gold ETFs, which is being considered an professional way to invest in gold. In reality, bullion traders who previously kept physical gold have also shifted to gold exchange traded funds.

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