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Invest in Gold through ETFs

Gold ETFs have made investing in physical gold much easier. Here are the advantages they offer

I am planning to invest in gold, but unable to decide on whether it should be an ETF or physical gold. Please throw some light on the ETF/Gold Funds that can be chosen. The investment amount would be around Rs 1 lakh. —Raghavendra Ramarao

With the rising gold prices globally, investors have benefited off late by investing in this asset class. Gold exchange traded funds (ETFs), many of which were launched last year, have made investment in physical gold easy. These funds have various advantages when compared to direct investment in physical gold. The units of such funds are traded on a recognized stock exchange and there is no associated wealth tax liability if you hold units of a Gold ETF.

In the past one year, Gold ETF's have emerged as the second best performing category after Equity Banking with returns of 24.68 per cent (as on April 25, 2008). There are currently six gold ETFs in the market, with only two having a performance history exceeding one year. Apart from investment in an ETF, there is a fund — DSP ML World Gold Fund which invests in stocks of international gold mining companies. The fund has generated an astounding return of 38 per cent in the past nine months. AIG has also launched a fund on the similar lines.

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