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GOLD

Life Insurance for Family Gold Exchanges Traded Fund

Gold Savings Fund is a new concept of investing in gold as it allows you to invest in gold without a demat account. These funds are Fund of Fund & it endeavors to near the returns of Gold Exchange Traded Fund which in turn invests in physical gold. But unlike a ETF the fund does not require a demat account and the stock market route for buying and selling the units.

These funds are passively managed fund suitable for a long term investors, who can invest through SIP or lump sum. As a long term investment it gives an opportunity to invest in the GOLD commodity, in a convenient way, which is one of the fancied assets for any investor.

Features & Benefits of Gold Savings Fund

1. No need for having demat account: so no need to open a demat account and pay the annual maintenance charges.
2. Systematic Investment Plan (SIP): Benefit your investment by investing through small amount over a period of time.
3. Easy to Invest & Liquidate: similar to investing in a mutual fund scheme.
4. Purity & Safety: investment is in highest quality gold with without

Currently two options are available in market:

1. Kotak Gold Savings fund
2. Reliance Gold Savings Fund



Why should an investor invest in Gold ETF?

  • No worry on adulteration
  • Gold provides diversification to the portfolio
  • Gold is considered as a Global Asset Class
  • Gold is used as a Hedge against Inflation
  • Gold is considered to be less volatile compared to equities
  • Held in Electronic Form
  • Store of value
  • Extremely Liquid
Advantages of Investing in Gold ETFs

  • Potentially cheaper to have price exposure to gold price as compared to other available avenues
  • Quick and convenient dealing through demat account
  • No storage and security issue for investors
  • Transparent pricing
  • Taxation of Mutual Fund
  • Can be traded on stock exchange like buying / selling a stock
  • Ideal for retail investor as minimum lot size to trade is one unit on secondary market
NAV of a unit will track price of approximately ½ or 1 gram of gold

Comparison of Gold ETF with Physical Gold

1

How Gold is held Physical(Bars / Coins) Physical(Bars / Coins)
2 Pricing Differs from one to another. Neither transparent nor standard. Differs from bank to bank. Not Standard.
3 Buying Premium above gold price Likely to be more Likely to be more
4 Making Charges Charges are incurred Charges are incurred
5 Impurity Risk High Nil
6 Storage Requirement Locker / Safe Locker / Safe
7 Security of Asset Investor is responsible Investor is responsible
8 Resale Conditional and uneconomical Banks do not buy back
9 Convenience in Buying / Selling Less convenient, as Gold needs to be moved physically Less convenient, as Gold needs to be moved physically
10 Quantity to Buy / Sell Available in standard denomination Available in standard denomination
11 Bid Ask Spread Very High Can’t Sell Back
12 Risk of Theft Yes, possible Yes, possible
13 Wealth Tax Yes Yes
14 Long Term Capital Gains Tax Only after 3 years Only after 3 years

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Investor Requirements for trading in Gold ETF

  • Trading account with a stock exchange broker
  • Demat account as Gold ETF can be traded only in demat form
Settlement: The transactions are settled with T+2 rolling settlement

Load Structure

Entry Load: Nil
Exit Load: Nil


Tax treatment of Gold ETF

The Gold ETF is classified under mutual fund and will be taxed as per non equity mutual fund taxation rules. Investor investing in Gold ETF need not pay wealth tax. Investor has to pay taxes after redemption as per the tax laws applicable for non equity mutual fund. But, when the Gold ETF is redeemed for physical gold the taxation rules will be similar to that of physical gold.


Tax treatment of Gold ETF

  • Benchmark Mutual Fund - Gold Benchmark Exchange TradedScheme (NSE Symbol: GOLDBEES)
  • Kotak Mutual Fund - Gold Exchange Traded Fund (NSE Symbol: KOTAKGOLD)
  • UTI Mutual Fund - UTI Gold Exchange Traded Fund (NSE Symbol: GOLDSHARE)
  • Reliance Mutual Fund - Gold Exchange Traded Fund (NSE Symbol: RELGOLD)
  • Quantum Gold Fund - Exchange Traded Fund (ETF) (NSE Symbol: QGOLDHALF)
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