What is the difference between Gold ETFs and Gold funds?
While the Gold ETF has no load, most gold funds have an exit load
What is the difference between Gold ETFs and Gold funds?
Vimal Shah, Gandhinagar
Gold ETFs invest directly in physical gold which means the buying and selling price of all the gold ETFs is identical. The returns generated by gold ETFs at any given point of time are also similar though there will be a minuscule difference between the schemes because of their different expense ratios. Moreover, you need to have a demat account when investing in gold ETFs.
In contrast gold savings fund is a boon for all those investors who do not have a demat account and wish to invest in a gold ETF. This is a passively managed fund of fund (FoF) that invests in the open-ended Gold Exchange Traded fund of the same AMC, which in turn invests in physical gold with 99.5 per cent purity. It is because of such a structure that the fund is able to offer the convenient SIP route to investors.
However, this fund comes with a rider: while the Gold ETF has no load, most gold funds have an exit load which tapers with the duration of holding in the fund. This load is the cost of convenience that one will pay when investing in this fund instead of paying annual maintenance charges for a demat account , delivery brokerages charges, transaction charges incurred for investing through the dematerialized mode.