The love affair between Indians and gold finds its roots embedded deep down in society. Not only has gold been an extremely popular form of jewelry for Indians, but it has also historically been associated with a good investment.
While Indians are still involved in storing gold for gains, we now have a newer and more efficient method of investing in gold; gold ETFs.
A gold ETF is traded at the stock exchange, where investors invest in the metal, without acquiring ownership of or possessing the precious metal.
Here we mention some of the things you need to know about investing in these gold funds, to ensure that your investment proves to be successful.
Multiple Gold Fund
The infatuation Indians have for gold transcends outside of their homes as well. So much so, that every fund provider present in India has its very own gold ETF and mutual funds.
Thus, there are numerous options for the layman investor to scroll through.
Besides gold funds, you can also invest in gold through future contracts within the commodities market.
Trading in futures is often quite complex, which is why you better have an expert beside you to guide you through the process.
Gold funds aren’t just limited to one exchange, as they are traded in multiple exchanges across the nation. These funds can either be traded in the Nifty or BSE-Sensex stock exchange.
The gold funds that are available in the stock market are influenced directly by the value of gold in the international and local market.
Hence, the price of the precious metal in the international and domestic value can influence the gains that investors are expecting on their gold investment.
Gold funds usually surge up in cost during times of economic turmoil, as investors are looking for a safe haven investment not impacted by socio-political turmoil.
Sovereign Gold Bonds
Many investors confuse sovereign gold bonds to be a part of gold funds, but that is not the case.
Sovereign bonds are issued by the government, and cannot be liquidated or cashed in the stock exchange.
The government provides financial security to investors by ensuring periodical payments on these bonds, but the return is considerably lower than what it is in the private market.
Diversification through Gold Funds
Portfolio analysts and fund managers swear upon the utility of gold funds as a means to diversify a portfolio.
A portfolio is diversified when investments are made in a number of different stocks, present in the market.
Laymen investors that put all of their eggs in one basket have to bear significant losses as a result of limited expertise. Professional fund managers make use of gold as a way to improve diversity in the portfolio and reduce the risk of the assets, without compromising upon the returns.
Gold prices remain stable when stocks take a downfall, which is why this addition can complement and stop the overall value of your assets from deteriorating.
The information above can help put you on the right track for investing in gold funds.