You may have been hearing all around that people are investing in gold and are advising you to do so too. However, buying physical gold is not the only option. Let us explore a Gold Savings fund and a Gold ETF and get acquainted with their features and differences. You can then gauge what would be a better investment option for you.
The main advantage about a Gold Savings Fund is that you can invest in it even if you do not hold a Dematerialized (Demat) account. You can even start a Systematic Investment Plan (SIP) with respect to this fund without a Demat account. Through an SIP, one invests a fixed amount at regular intervals, generally every month, into the fund. However, a Demat account is not required if one wishes to invest in a Gold ETF.
Gold Savings Fund
Gold Savings fund are very simple investments. It is simply a mutual fund that invests in their Gold ETFs. They even invest in some other short term funds. If the investor cannot constantly track his investment or is new to the investment world, it is a good option to invest in a systematic investment plan of Gold Savings fund. These funds do not directly invest in gold. The investment happens indirectly through Gold ETFs. However, as a Gold Savings fund invests through Gold ETFs, they have higher charges.
Gold Exchange Traded Fund
Gold Exchange Traded Funds or Gold ETFs invest directly in Gold. The fund keeps an eye on daily gold prices and trade in physical gold to get the desired returns. Gold ETFs have their own high cost ratio which is the secret of the great investment results. The investments are electronic, i.e., one can invest in gold without actually holding it in physical form. However, one is required to have a Demat account to invest in a Gold ETF. Also, one cannot invest in it through an SIP, unlike Gold Savings Funds.
A Gold Savings fund offers you the option of SIPs which are suitable for those who want to invest in a regular and disciplined manner on a long term basis. Also, the need of a Demat account does not arise. However, they do not invest in gold directly and also have higher charges than Gold ETFs. If you do have your Demat account, Gold ETFs can be a better option as they will also cost you lesser than Gold Savings Funds.