This post takes a look at the gold ETFs that are available to Indian investors. Right now there are six such gold ETFs in India.
| Name | Expense Ratio | Pricing Per Unit | Inception Date |
| Benchmark Mutual Fund – Gold Benchmark Exchange Traded Scheme | 1% | Approximately 1 gram of gold | 08 – March 2007 |
| UTI Mutual Fund – UTI Gold Exchange Traded Fund | 2.5% | Approximately 1 gram of gold | 3rd Jan 2007 |
| Kotak Mutual Fund – Gold Exchange Traded Fund | 2.5% | Approximately 1 gram of gold | 21st June 2007 |
| Reliance Mutual Fund – Gold Exchange Traded Fund | 2.5% | Approximately 1 gram of gold | 1st November 2007 |
| Quantum Gold Fund – Exchange Traded Fund | 1.25% | Approximately half a gram of gold | 27th February 2008 |
| SBI Mutual Fund – SBI Gold ETF | 2.50% | Approximately 1 gram of gold | 30th March 2009 |
Update: Corrected inception date of GoldBees. Thanks to Kartik Shah for pointing it out.
Tweet
Views: 83262
{ 68 comments… read them below or add one }
plz send me deliy update etf fund informetion
You can track NAVs of ETFs or mutual funds using sites like Moneycontrol. Here is a link that shows you how to do it:
http://www.onemint.com/2009/09/11/track-mutual-fund-navs-with-moneycontrol/
How to choose the best fund out of all these gold ETFs?
Are they all same?
All these physically buy gold and keep so that is one thing that is common in them. They charge you fee which is called “Expense Ratio”. The higher the expense ratio the more fee they charge. So that should be a factor to consider while buying.
Hi Manshu
1. Is the expense ratio only criteria for buying?
2. Is it possible to buy/sell these ETFs from ICICI direct?
Thanks for your anwer in advance
Anand
1. Expense ratio is one biggie, volumes are another. You don’t want to buy in something that is thinly traded. I think tracking error is also important which means how close are the NAVs and actual price of the ETF.
2. Yes, it is possible to do so. You can do it from the Stocks tab.
Dear Manshu,
Can u elaborate the detailed procedure of trading Gold ETF through ICICI direct.
It’s the same as buying any other stock. Have you bought a stock there?
After reading info provided by you I went little further and I came to know that all these ETFs have to maintain strict backup of physical gold with them. One ETF is more or less equivalent to one gram of gold. variation in there prices is due to difference in their service charges. In that sense you were very correct when you advised to purchase an ETF which have the least Service Charges. In case of ETFs particularly Security is not a big issue. As you correctly said earlier that our selection of ETF should be based on the quantum of dealings and the services charges they charged.
Pl. share in case you found any new facts in this concern.
Thanks
I really didn’t find anything new, but did a small bit of research comparing the past two year returns on gold ETFs, an the numbers show that the company with the least expenses has the highest returns.
http://www.onemint.com/2010/06/26/2-year-returns-of-existing-gold-etfs/
Hey Manshu,
I dint understand what do you mean by Thinly traded?
Regarding Tracking error, where is that cited? Do ETFs mention that somewhere?
Thanks
Anand
Hey Anand,
By thinly traded I meant ETFs that do not have much trading volumes. You can find out trading volumes by going to nseindia.com, entering a ETF code, and pulling up information about it. You can compare a few ETFs of the same category to see what each one looks like.
Tracking error is generally given in the Statement of Additional Information (SAI) or prospectus. You can compare them to see how each fares.
Thank you Manshu..
Now you can add Religlare gold ETF in this list and make it seven
I shall do that, thanks!
hey manshu,
will u please tell me in which gold etf i should invest now.
this is a stupid question when u already answered it that expense ratio must be considered.
but i m still confused because the expense ratio of all the Gold etf are same i.e., 2.5%.
thats why i m confused.
looking forward for your reply.
GBU.
It is a good question, and slightly difficult one too.
You can see that the expense ratio of Benchmark are the lowest. I have not done an exercise to take the value of all gold ETFs and compare their returns for the past couple of years, but this will be a good thing to do. It will show you how much expenses are eating up returns. Liquidity or volume is another factor.
I don’t make recommendations on this blog because I am not a professional qualified to do so, but these will be the factors I would look at.
Hi Manshu,
After reading everything I found GS Gold Bees is best to purchase but why I am not getting any return info about this fund on money control:
http://www.moneycontrol.com/mf/gainerloser/snapshot.php?op1=ab&option=gold&sort=im_asstsize
Which scares me.
Please check and answer. Waiting for ur reply.
I don’t know why it isn’t in Moneycontrol and couldn’t care less if it is there or not. It makes no difference at all to me whether a particular fund is listed in their system or not. I have seen and analyzed the price data directly from the NSE website many times, and you can see the results on some of the posts here too.
Why is it a concern to you if something is present in the MC system or not?
Dear Manshu,
You said you are not pro. but believe me the info provided by you is not less than any pro.
Do you think any security issue should also be considered before investing in ETFs. Will you rate SBI ETF better than Benchmark on this count?
Thanks in Advance.
That’s a good question, and I will consider that factor in most cases, though probably not very high in the list because they are supposed to hold physical assets with them, and it is not structured as an ETN, where this factor probably becomes the number 1 factor. \
Also, Benchmark is doing great volumes so that should bring some confidence as well. Here is a post comparing the volumes:
http://www.onemint.com/2010/04/19/which-is-the-best-gold-etf-in-india/
Hello Manshu,
After going through all the discussions here in the blog, the question that araised in my mind is in what way the gold ETF is better than buying a gold coin.
One more question is the expense ratio is calculated on weekly basis (as per the discussion above), in that case will the expense ratio gets decreased from our invested amount?
Dont mind if my questions looks silly
..
Thanks in advance!!
Hi Viswanath,
After seeing the debate of gold ETF vs real gold coins rage all over, I feel that there are pros and cons to both, and ultimately it comes down to what you are comfortable with. If you are okay with buying coins from a jeweler and know that they will buy it back from you at market rates without cutting too much then go that route (remember banks don’t buy back their coins).
If on the other hand you prefer to trade electronically, and want to invest smaller sums over a longer period of time, and want to take advantage of the liquidity of the ETFs then gold ETFs are for you.
I don’t think I understand your second question clearly….the costs are calculated on a weekly basis and do change from time to time, but not sure how that implies it will go down.
Thanks for the qucik response Manshu.
The question is lets suppose that i have invested Rs. 10000 in gold ETF’s, the expense ratio for the 1st wk would be arround 150 (1.5%) per wk. So monthly arround 600 will be charged as expense ratio, now this 600 is reduced from my 10000 investment?
Read the link that I shared with Radhika…..it will be helpful in understanding this concept in a broader context: http://www.hdfcsec.com/CMT/Upload/ArticleAttachments/Gold%20ETFs%20Recent%20FAQs.pdf
Manshu, you have been rating Gold BEE ETF as the best among the Gold ETFs. But to my observation, SBI Gold ETF is doing better. When all the Gold ETF’s prices dropped, Gold BEE and SBI Gold ETF were almost at same price of Rs. 1780-1790 range. And now, SBI gold ETF is 1900+ while, Gold BEE is below 1900. Also, I find that SBI Gold prices move up faster than Gold BEE.
When you compare ETFs say Benchmark and SBI I would suggest few more points to consider such as:
1. Volume in the schemes – I believe ETF with more volumes is certainly better.
2. Compare two on slightly long range data. ETF with less transactions is easy to manipulate.
3. Benchmark started operations in 2008 whereas SBI started its operations in 2009. With higher rate of expenses its net worth will certainly comedown over a period of time.
Thanks
Do leave a link if you have plotted this somewhere or is in the form of some excel sheet or something that we can see. I found this recent research by HDFC Sec which shows that SBI has in fact given the lowest monthly return. That is quite a small period, but the thing makes for an interesting reading. Hope you find it useful:
http://www.hdfcsec.com/CMT/Upload/ArticleAttachments/Gold%20ETFs%20Recent%20FAQs.pdf
Few things that come to my mind regarding Gold bars/coins vs Gold ETFs:
Disadvantages of holding bars/coins:
- You are forced to buy in pre-determined quantities
- Storage and safety concerns
- Banks do not buy them back
- Jewellers might charge a margin while buying from you
Advantages of holding bars/coins:
- Available to you even when banks collapse or close (wars or financial meltdowns)
Advantages of holding Gold ETFs:
- Affordability – you buy the amount that you can afford
- Convenient – no hassles of storage and safety
Disadvantages of holding Gold ETFs:
- During wars or economic crisis, banks might close or collapse. So you won’t have access to your gold investment
Absolutely Dynamite, though I’m not very sure how will people use gold in case there is a war or something. I mean I think it’ll be really hard to sell, and if you do sell and get money out of it then that might be risky to keep and that kind of thing. But paper vs real thing – I’d totally wish to have the real thing if there is a war.
You have mentioned that the inception date for Gold BeEs is 7th March 2008. This is very surprising given that Gold BeEs was the first ETF to be launched in Indian market. The correct inception date is 08.03.2007 as taken from their own website: http://www.benchmarkfunds.com/Products/GoldBeES/Overview.aspx
May be this comment comes very late as the post is nearly a year and half old but it would still make sense in updating the facts, if not already done yet.
Best Regards
Kartik Shah
Thanks Kartik – I apologize for the error, and will fix it. I think this list misses a few other newly launched ETFs also, so will update that as well.
whatare the volumes of the etfs in gold in india in the last 3 months as the marrige season is nearly over?Is the value likely to fall now after the season
I don’t see gold ETF volumes getting impacted by the marriage season as this is an instrument strictly used for investment purposes.
I don’t comment on the future of gold prices.
1. Is there an updated list of gold ETFs that are available to Indian investors?
What is the relation of 1 gm of gold with the actual gold price?
2. If the pirce of reliance shares come to half from what they are now, will it affect the price of its 1 gms gold?
3. Is the expense of 1% like in the case of Goldbees, a yearly cost or only at the time of buying?
4. or this 1% is charged every year?
5. how is this charged?
1. Available on the NSE website – go to the ETFs tab there.
2. 1 gram represents 1 unit after deducting expenses for all ETFs except for Benchmark.
3. Yearly.
4., Yes.
5. Reduced from the NAV.
hi manshu,
i am an mba student , i am looing towards to make a project on gold ETF funds , so please can u help me out for colllection of data.
All the data is publicly available in NSE website, or websites of individual ETFs so you can hunt for it there.
Hi Manshu,
Your info on ETF was very useful. One basic question which everyone would be bugging you.With gold prices gone high already is it the right time to invest in ETF ?
Thanks in Advance,
Hari
Hari – I really don’t have any particular insight on gold price movement. I’ve been personally staying away from it seeing all the retail interest, but I don’t have any special insight into the gold situation.
which IS BEST LONGTERM gold ETF SCHEME TO INVEST BY WHICH I WOUD GET THE BEST RETURNS OVER THE PERIOD OF TOME ?
Is the SIP option available in Gold BeeS ETF from Benchmark Funds? i want to invest in gold ETF of Gold BeeS ETF from Benchmark Funds as SIP mode. Is it possible..pls advice.
Yes, Systematic Stock Purchase is available for this ETF through ICICI. I am doing it for last 1 year.
Hi Manshu
Thanks for all the information you have provided. I am a Channel Partner with Angel Broking Ltd in India. I have about 2,220+ clients. After reading your blogs on Gold ETF, i have really learnt a lot on this subject which in a way has helped a lot of my clients also. All the credit goes to you. Just wanted to tell you that. Thanks.
Hi Gaurav – That’s a very nice gesture – I appreciate that a lot – you made my day
!!!
Hi Manshu,
This blog is really good and it will help to understand the Gold ETF.
I am also planning to invest in GOLD ETFs. But only after studied well
1. Normally what is the Entry Load and Exit Load ?
2. What is annual recurring cost of maintenance?
3. How much the Selling Cost?
4. Is the any Brokerage charge?
5. What is the yearly tax rate?
6. Is there any other expenses which will deduct from the NAV?
HI Aji,
Thanks for your kind words.
Here are the answers to the best of my knowledge:
1. ETFs have no entry or exit load.
2. 1% or higher.
3. The brokerage that your online broker charges.
4. Yes, the brokerage will depend on what your broker charges for shares since these are to be treated like shares.
5. Yearly tax rate is same as debt mutual funds. Can be found here: http://www.onemint.com/2011/04/11/capital-gains-and-dividend-taxes-on-shares-and-mutual-funds/
6. No.
Hello Manshu,
First of all I would like to thank you for providing us such a detailed and correct information. My question is
1. I want to buy Gold ETF which one is the best?
2. Should I put all my money in 1 gold ETF or should i buy 2 of them ?
Thanks,
Manpreet
Hi Manpreet – I’d say Benchmark GoldBees is the best option in what you have right now. Also, you can split it up into two if you’re worried about fraud or something, but I don’t see any other reason to split the investment. The performance of all gold ETFs is quite close, and Nova Scotia is their common gold custodian (there are others as well) so I don’t know a good way to diversify that perceived fraud risk, but you could buy two if that makes you more comfortable.
Hi,
Can you please tell me what is expense ratio?
Is the expense ration % keep changing every year?
Hi,
Your site is of immense help for every investor.
I have one question…If i take out my investment from any Gold ETF by less than an year, even then will i be charged the same annularised Expense ratio or for only the months i remained invested?
Thank you Ravi.
Yes, you will be charged the expenses, they are annualized but are charged constantly so that shouldn’t be a factor on when you sell the ETF.
http://www.goldetf-funds.com/expense-ratio-of-gold-etfs please refer this link. Ratios are very different. For gold bees u said 1 % this link shows 2.25%…Which is correct
You can go the Benchmark website, and check the rates there. It’s 1%.
similarly go to all gold etf sites & research for actual expense ratio. They are all in range of 1 to 1.25. Say kotak gold ETF has actual ER =1. Same is case with all ETTF u have mentioned.
What u have mentioned for all 2.5 % are maximum allowed ER by individual & not actual.
Check following links for actual ER
http://www.tflguide.com/2011/07/etf-mutual-fund-india.html
http://www.mutualfundsindia.com/fundfactsheet1.asp?sname=KM231
So practically at present all ETF are at ER of 1 only SBI has 1.06 to 1.07….
Please research your data & revert back
This was written in Sep 2009, so some values may have changed. I haven’t looked at it lately, but I think your point merits a re-look. I’ll look at the expense and volume data for every fund again, and publish a new post as well as update this one. Thanks Kishor.
Hello manshu,
thanks for making efforts to publish new post,
See for example of kotak….
http://www.kotakmutual.com/kmw/JSP/viewActualExpenseRatio.jsp
Likewise one may dig respective MF sites for present actual data
hi,
Should i go for ETF option or gold bars and coins.what is advisable ?
also what is the expectable rate of gold in the year 2032?
Hi Ashwini,
That decisions is really up to you. If you are buying gold coins then just make sure what will be the deduction when you sell them back to the jeweler because in some cases they are charging a lot of money – even 10% or so.
And I’m fairly sure no one really knows that the expected price in 2032 will be.
Can you please let me know what is “expense ratio ” and which gold etf should i buy on my own risk i can invest 8-10 k monthly
Hi Manshu,
Somewhere in these posts i read that one unit of ETF’s actual value keeps of diminishing because of Expanse ratio of something as holding period increases.
lets say i bought a unit now and on 1% expanse ratio my unit after an year will hold .99 unit of Gold and on similar lines, my one unit of ETF will hold .75 unit of gold after 25 years.
please dont mind if i have got it all wrong.
Hi Sat Prakash – that’s a good question, and what happens is that the price of the ETF gets re-adjusted to the value of the gold it holds periodically, so while initially a unit of ETF is supposed to reflect a gram of gold that’s more of an indicative thing, and if you buy any gold ETF that has been there for a little while – this relationship will not hold true at all.
The expenses that a fund incurs will be deducted from the returns it makes, and that consequently reduces the gold that one unit represents. Higher the expense – worse this situation will be and this is true for all type of mutual funds or ETFs.
Now the funds will earn some money from whatever liquid investments they have and also the gains made by the underlying asset, so the relationship between number of years and percentage gold may not be linear.
So if you buy something today and hold it for 10 years – the returns will be reduced to the extent of the expenses and for that reason you should always look for a lower cost – however it may not always be the case that this relationship is clearly visible in the fund.
Does that make sense?
Manshu,
Thanks for sharing your knowledge – it has helped me get a very good understanding of gold ETFs.
Perhaps a basic question – is there an ‘authoritative’ site to track the underlying gold prices used to calculate the NAVs for gold ETFs?
You can look at gold price movement at goldprice.org or even better is it to periodically see how three or four ETFs have moved. They may have different movements on a day or two, but over a month or so the return should smooth out and be very close to each other.
Hi Manshu,
Can you recommend a site/s which can be used to compare performance of GETFs? MC was something which did not impress me much, atleast on GETF comparisons.
Thanks and Regards,
Chandrachur
Hi Chandrachur – I usually go directly to the NSE website and pull the data I need from there, so you may try doing that as well.
Pl. send me how can I invest in gold etf. What is the prosedure for it
hey,, can you please provide me the evolution on gold etf in india, procedure of investing, performance…
{ 5 trackbacks }