Digital Gold investment: Gold ETF vs. Mutual Fund - Which is Better?

New Delhi: In India, gold is not just another precious metal but an emotion. Whether it is marriage or investment, the glow of gold never fades. After the recent fall in gold prices, many people have started looking at it as a buying option. But now times have changed. Instead of keeping gold in the vault, several investors are preferring to invest in digital gold i.e. Gold ETF or Gold Mutual Fund. The question is, which of the two options is more beneficial?

Gold ETF (Exchange Traded Fund) is an investment instrument that tracks the prices of physical gold. This means that when the price of gold rises, the price of an ETF also increases and when gold is cheaper, its value also decreases. Each ETF unit is equal to 1 gram of 99.5% pure gold.

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A demat account is necessary to invest in it because they are bought and sold like shares on the stock exchange. The advantage of this is that you do not have to worry about keeping gold at home and there is no problem of theft or purity.

Gold Mutual Fund is a good option for those who do not want to open a Demat account. These funds invest directly in gold or in gold ETFs. That means you are investing money in gold indirectly through mutual funds. In this, you can start investing through SIP (Systematic Investment Plan) with a small amount, which makes it very easy for beginner investors.

Gold ETF vs Gold Mutual Fund

The cost ratio of gold ETFs is generally between 0.4% and 0.7%, which is lower than that of mutual funds. However, demat account fees and brokerage charges are also added to this.

Gold mutual funds, on the other hand, have higher expenses ranging from about 0.8% to 1.5%. This includes charges like fund manager fees, exit load and commission. So ETFs are a bit cheaper in terms of cost.

Statistics for the last 10 years show that both Gold ETFs and Gold Mutual Funds have given an average annual return of around 13-14%. The only difference is that due to the low expense ratio of ETFs, the net returns come out a bit better. That is, if you are investing for a long time, then gold ETFs may give you a slight advantage.

If you can trade easily in the stock market and have a Demat account, then Gold ETF will be better for you i.e. low expenses, real-time trading and good returns. But if you are a new investor and want to invest a little every month, then Gold Mutual Fund will be easy and convenient for you.