Gold ETFs

I am 29 and plan to invest in gold ETFs by purchasing one unit every month, for five years. Is this the right approach?
— Vamsi

Investing in gold through exchange traded funds is a good and safe option. Since gold ETFs invest directly in physical gold, the buying and selling price of all 10 funds is identical. The returns generated by gold ETFs at any given point of time are also similar. There will be a minuscule difference between the schemes because of their different expense ratios. So, when investing in a gold ETF, go for the one that is the least expensive. To invest in gold ETFs, you will need to have a demat account. Your strategy to buy a unit every month is a good move, as no asset management company offers a systematic investment plan for gold ETFs. And, limit your exposure to gold to around 5-8 per cent of your overall portfolio.

This article was originally published on January 12, 2011.