ETFs as an investment option
Glitter with Gold ETF
Updated on Saturday, May 7, 2011, 19:35 Print Email
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Reema Sharma

For centuries people have been investing in gold. Buying raw gold, gold coins and gold jewelleries had been the common practice even till the beginning of 1960s. Gradually it was felt that there could be Exchange Traded Funds (ETF) which would help in tracking the price of gold.

When an investor wants to invest in gold, ETF’s are a considered as the simpler of the options. Such ETFs have high-performing effects on the market. This is a simpler option because the investor can own gold without owning it in physical terms. Investor only owns a percentage of what the stock of gold represents.

Gold ETFs were made with the aim of monitoring companies that deals with the gold industry.

Central Fund of Canada, a closed-end fund founded in 1961 was the first gold exchange-traded product. Eventually in 1983, the fund amended its articles to provide investors with an exchange-tradable product for ownership in both gold and silver.

India, which accounts for 20 percent of global demand, is the world`s top consumer of gold. Benchmark Asset Management Company Private Ltd conceived the idea of a gold exchange-traded fund in India. In May 2002 the company filed a proposal with the SEBI. Later in March 2007 gold ETF was launched because the company failed to receive regulatory approval in the beginning.

It is advisable for the beginners to have a thorough understanding of the ETF before jumping into investment. No doubt, these ETFs add a lot of diversity to the portfolio of investment but one should be very mindful of the investment time frame before entering into ETFs.

Testing the water involves a sound technical understanding of the ETF that you are going to borrow. The most important thing that you have to always keep in mind is that it is only the psychological value of the metal that you are going to own. You can also consider investing in a couple of ETFs other than investing in just one.

Unlike gold ETFs silver ETFs have yet to see the light of day in India. Silver ETFs have not yet taken off in the country because of the debate over whether trading will be allowed under market regulator SEBI or commodities market cop.

ETFs have played a prominent role in establishing gold as a unique asset class. Considering the popularity of gold in India and the increase in awareness among investors over gold as a financial asset, a number of fund houses have come forward with ETFs.

Ten mutual fund houses in the country have come up with gold ETFs.

These include:

-SBI gold exchange traded scheme

-Gold Benchmark Exchange Traded Scheme (Gold Bees)

-Axis Gold ETF

-UTI gold exchange traded fund

-Reliance gold exchange traded fund-dividend payout option

-ICICI Prudential Gold Exchange Traded Fund

-HDFC Gold Exchange Traded Fund

-Religare Gold Exchange Traded Fund

-Kotak Gold ETF

-Quantum Gold Fund

All the investor has to do is get ready with the brokerage rate which is fixed and charged upon buying and selling these ETF. So don’t wait. Just turn to gold exchange-traded funds.

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