Best Gold Exchange Traded Funds (ETFs) have become a popular investment option for Indian investors looking to gain exposure to gold without the need to hold physical gold. Gold ETFs are investment funds that are traded on stock exchanges, and they aim to track the price of gold. These funds are backed by physical gold of 99.5% purity, providing investors with a secure and convenient way to invest in gold.
Why Invest in Gold ETFs?
Gold has long been considered a safe-haven asset, providing a hedge against inflation and currency fluctuations. Investing in Gold ETFs allows investors to benefit from the price appreciation of gold while avoiding the risks and costs associated with holding physical gold. Unlike physical gold, Gold ETFs are highly liquid, meaning they can be bought and sold easily on the stock exchange during trading hours.
Gold ETFs also offer advantages such as:
- No storage or security costs
- High liquidity
- No making charges (unlike gold jewellery)
- Tax efficiency compared to physical gold
- Transparency in pricing
Top Gold ETFs in India
Here are some of the best-performing Gold ETFs in India based on their past returns, assets under management (AUM), and expense ratios:
1. Nippon India Gold ETF
- AUM: ₹3,500 crore (approx.)
- Expense Ratio: 0.39%
- 1-Year Return: ~12%
- Nippon India Gold ETF is one of the oldest and most trusted Gold ETFs in India. It closely tracks the domestic price of gold and has consistently delivered strong returns.
2. HDFC Gold ETF
- AUM: ₹2,800 crore (approx.)
- Expense Ratio: 0.45%
- 1-Year Return: ~11.8%
- The HDFC Gold ETF is managed by HDFC Asset Management and is known for its low tracking error and consistent performance.
3. ICICI Prudential Gold ETF
- AUM: ₹2,500 crore (approx.)
- Expense Ratio: 0.50%
- 1-Year Return: ~11.5%
- ICICI Prudential Gold ETF provides exposure to domestic gold prices and is one of the most liquid Gold ETFs in India.
4. SBI Gold ETF
- AUM: ₹2,100 crore (approx.)
- Expense Ratio: 0.45%
- 1-Year Return: ~12.2%
- SBI Gold ETF is known for its low expense ratio and effective gold price tracking, making it a preferred choice for conservative investors.
5. Axis Gold ETF
- AUM: ₹1,800 crore (approx.)
- Expense Ratio: 0.50%
- 1-Year Return: ~11.7%
- Axis Gold ETF offers investors an opportunity to participate in the gold market with low tracking errors and a strong management team.
How to Choose the Best Gold ETF
When selecting a Gold ETF, consider the following factors:
- Expense Ratio – A lower expense ratio ensures that more of your returns are retained.
- Tracking Error – Lower tracking error indicates that the fund closely mirrors the actual price movement of gold.
- Liquidity – Higher liquidity ensures that you can easily buy and sell units on the stock exchange without a significant price impact.
- Fund House Reputation – Opt for funds managed by well-established asset management companies (AMCs) with a history of stable performance.
Taxation on Gold ETFs
Gold ETFs are treated as non-equity investments for tax purposes. If held for less than three years, the gains are considered short-term capital gains and are taxed according to your income tax slab. If held for more than three years, the gains are treated as long-term capital gains and taxed at 20% with indexation benefits.
Advantages of Investing in Gold ETFs
- Diversification – Gold ETFs allow investors to diversify their portfolio and reduce overall risk.
- Inflation Hedge – Gold prices generally rise during periods of inflation, providing a natural hedge.
- Transparency – Gold ETFs are traded on stock exchanges, ensuring real-time price discovery and transparency.
- Accessibility – Even small investors can buy Gold ETFs as they are available in denominations as low as 1 gram of gold.
Conclusion
Gold ETFs are a smart and convenient way to invest in gold without the hassle of physical storage or security concerns. Nippon India Gold ETF, HDFC Gold ETF, and ICICI Prudential Gold ETF are among the top-performing options in India. Investors looking to hedge against market volatility and inflation should consider adding Gold ETFs to their portfolio. Before investing, it’s important to evaluate the expense ratio, tracking error, and liquidity to make an informed decision