Pros of Investing in ETF

• Easier Trading – The process of dealing in gold ETFs is similar to any other equity-based fund. It makes the entire process easier, especially if the individual is trading stocks via a stockbroker or ETF funds manger. They are much easier to liquidate; they can be traded during working hours.Moreover, gold prices are publically available in the stock exchange. It makes the entire process transparent and allows an investor to track changes, more frequently.
• No Entry/Exit Loads – Gold ETFs do not attract any entry or exit loads, ensuring zero additional charges when dealing in these funds.
• Tax Benefits – Other than capital gains tax, these traded funds do not attract VAT, Securities Transaction Tax, allowing individuals to save taxes on their investment.Investing in physical gold can make an individual liable to pay wealth taxes, especially if he/she purchases a lot of gold jewellery or gold bullions. Gold ETF investment do not attract any wealth taxes, which makes it better for tax saving.
• Less Market Risk – Gold prices usually do not fluctuate by a substantial margin, which allows prevention of a major loss even when returns on equities decrease by a substantial margin.As gold ETFs are available in variable denomination, it is ideal for all types of investors. One can start investing with as low as 1 unit of traded fund, which represents one gram of gold.
• Usage as Collateral – Gold ETFs can be presented as collateral against a secured loan borrowed from any financial institution. It presents more convenience than traditional hypothecation as the entire process stays significantly less time-consuming.

Purpose

Gold ETF is an ideal investment strategy to broaden a financial portfolio and to get exposure in a variety of sectors like gold mining, manufacturing, etc. These traded funds are relatively simpler to obtain and provides an easier way to invest in the gold industry.

The gold ETFs can also be used as hedge protection against a fluctuating market, which makes them an alternative to other available financial products in one’s investment portfolio. For example, investors can use short-term exchange traded funds to minimise their loss if the price of gold suddenly makes a rapid fall.

These exchange-traded funds are rated as some of the best defensive assets available in the market. It is considered to have the same class traits as bonds as many investors use them to insure their investments against economic fluctuations, and in extreme cases, currency debasement. The price of gold can rise by a significant margin if major currencies, like dollar, tend to fall weak. Investing in gold ETF can allow an individual to profit from that sudden drop.

Each unit of these traded funds represents 1 gram of 99.5% pure gold, which makes them ideal long-term investments, especially if an individual opts to invest larger sums or performs trade systematically.