Last Updated on November 8, 2023 by BFSLTeam BFSLTeam
Diwali, the festival of lights, is a time of celebration, reflection, and making new beginnings. It’s also a season when many consider financial investments to brighten their future, with gold being one of the most popular investment choices.
Gold holds a special place in Indian households. It’s not just a symbol of wealth but also considered auspicious. Families often purchase gold jewellery or coins during Diwali time as a part of the celebrations. This cultural significance has extended to gold investments, making Diwali a popular season for investing in the precious metal. But, today, a large number of Indians are opting to invest in non-physical gold options, like Gold ETFs (exchange-traded funds). Let’s find out more.
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What are Gold ETFs?
Gold ETFs are financial products that mirror the value of gold and are available for trading on stock exchanges, much like how you trade individual company stocks. They offer a convenient and affordable means for people to invest in gold without having to possess and safeguard the physical metal. These funds are supported by actual gold, stored safely in vaults to guarantee their genuineness.
The Simplicity of Investing in Gold ETFs
Investing in Gold ETFs is simple and user-friendly, much like the way you light lamps and candles during Diwali. It can be done through a Demat account and an online trading platform like Bajaj Financial Securities Limited. You can start with an amount as low as the price of a small piece of gold jewellery. This simplicity is a key advantage for those who are new to investing or have limited funds to allocate.
Advantages of Gold ETFs
Apart from convenience, investing in Gold ETFs offers several other advantages too:
- Liquidity: Gold ETFs are highly liquid since they can be easily bought and sold on stock exchanges. This means you can convert your investments into cash quickly when needed.
- Affordability: Gold ETFs allow you to start with smaller amounts. You can purchase units of a Gold ETF for the price of a small piece of gold, making it an affordable option.
- Transparency: Gold ETFs provide transparency in pricing and holdings. The Net Asset Value (NAV) of the fund is disclosed daily, helping you track the fund’s performance.
- Safety and Security: When you invest in Gold ETFs, you eliminate the need to store physical gold. The gold backing the ETF units is stored in secure vaults, reducing concerns about storage, safety, and the cost of bank lockers.
- Diversification: Gold can act as a hedge against market volatility and economic uncertainties. Including Gold ETFs in your investment portfolio can diversify risk and help protect your overall investment.
Different Modes of Investment
The modes of investment in Gold ETFs offer flexibility to suit various investor preferences. Whether you prefer
- the simplicity of trading directly on stock platforms;
- the discipline of Systematic Investment Plan (SIP – invest a fixed amount regularly, just like SIPs in mutual funds);
- or the ease of Systematic Transfer Plans (STP – set up a systematic transfer from another account to invest in Gold ETFs);
there’s a method that aligns with your approach to investing.
Tax Implications
Understanding how taxes work with Gold ETFs is essential for smart investing. Previously, there were two types of applicable taxes when you sold your Gold ETFs: short-term (STCG) and long-term capital gains (LTCG). If you sold your Gold ETF units within three years from the date of purchase, it was considered short-term, and you paid taxes as per your regular income slab rate. But, if you waited for over three years, it was deemed long-term capital gain, and you paid a flat 20% tax rate with some added benefits due to indexation (if applicable).
However, as of 01 Apr, 2023, the LTCG indexation benefit has been scrapped, and now the profit received from selling your Gold ETF units is considered as short-term capital gain and taxed accordingly.
Unlike physical gold, Gold ETFs do not attract sales or wealth tax, making them a tax-efficient investment. Along with their flexibility, liquidity, and transparency, Gold EFTs make for a compelling choice.
Final Thoughts
So, this Diwali, consider taking a step towards prosperity and blessings by adding Gold ETFs to your investment portfolio. It’s not just a financial decision; it’s a step towards safeguarding your future and ensuring that your investments shine as bright as the Diwali lamps.
To invest your hard earned money with confidence, opt for a trustworthy, reputed, and reliable investment platform. Bajaj Finance is one of the most reputed financial institutions in India. Its 100% subsidiary, Bajaj Financial Securities Limited (BFSL), offers a fast, secure, stable, and user-friendly investment platform. With BFSL, you can invest in and manage your Gold ETFs with total ease, convenience, and peace of mind.
Disclaimer: This blog is solely for educational purposes. The securities/investments quoted here are not recommendatory.
Investments in the securities markets are subject to market risk, read all related documents carefully before investing
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Sources:
https://www.amfiindia.com/investor-corner/knowledge-center/gold-etf.html
https://www.valueresearchonline.com/stories/16967/taxation-on-gold-etfs/
