The list of Gold ETFs in India is a fairly long one and it doesn't cause a ripple of any kind if another one is added to the trail. So, to stand out in the queue, Motilal Oswal has come out with its Gold ETF which gives you a chance to convert your units into physical gold.
But that's where the difference ends. Because of their design, all ETFs are alike. In a Gold ETF, you buy and you sell it and are able to ride the appreciation and depreciation in the value of gold less expensively, and typically, the expense range is frozen at about 1 per cent. While in this fund you buy the Gold ETF and you can get the gold in return for a minimum denomination of 10 grams. 1 unit will represent 1 gram; so if you redeem 10 units and want to take gold in lieu of cash, it is possible and this is where this fund becomes unique.
Fuel that adds to fire
But one question remains unanswered. Why this fascination with Gold ETFs? How come they have become the buy of the season for many years on the trot? Well, there are two factors which have played part simultaneously. One, the great uncertainty across world's financial markets has made gold a metal to hoard and the other is the democratization of gold ownership in the paperless form, which is a 6-7 years old phenomenon, and it is still gaining popularity and making inroads.
Currently, there are 22 Gold funds in India and have Rs 12, 378.68 crores invested in them.
Despite all this, one should be apprehensive and look at it only as an opportunistic investment, not as a fixed allocation to one’s portfolio, because it will turnaround when we least expect it.
Is it for you?
While there is not much to differentiate between the Gold ETFs currently available, small investors who do not have a demat account should go for a gold fund for the convenience. But it comes with a cost of 50 basis points more.
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