Which is the best gold ETF in India?

by Manshu on April 19, 2010

in ETF

Update: I have done a more recent comparison on gold ETFs and that data can be found here. The methodology is the same which you can read there as well, but reading this post gives a good perspective on how this space has evolved.  Updated Article. 

This question keeps popping up in emails and comments from time to time, and I thought I’d address this with a post. Let me begin this post by saying that this is just my way of deciding which is the best gold ETF in India, and you are free to poke holes in this methodology, or even reject it outright, but if I were to invest in a gold ETF – this is the way I would go about it.

First off – I’d compare the expense ratios of all existing Indian gold ETFs, and see which are the ones with the lower expenses. I have already done that research earlier on this blog, and know that right now the Gold BeeS ETF from Benchmark Funds has the lowest expense ratio of 1%. Quantum Funds comes second with 1.25%. All the other funds charge higher expenses. The lower the expenses – the better it is because it leaves more on the table for investors.

Expenses alone are not enough for me because I want my investment to be liquid, and need the fund to have good volumes too. I went to the NSE website and gathered the volume data for all gold ETFs for the last month or so. I am presenting you yesterday’s volume data of all gold ETFs here. I am presenting just one day’s worth of data because that is pretty much representative of the overall volumes and is easier to read.

Gold ETF Volumes in India

Gold ETF Volumes in India

As you can see from the image – Gold BeeS, which has the lowest expenses also has the highest volume, and by a large margin too.

That does it for me – and if I had to invest in a Gold ETF – it would be this.

Keep in mind though that this is just my opinion and not expert advice tailored to your investing situation. Also bear in mind that I am not going to invest in this ETF because I am not looking at investing in gold right now, and even if I was – I would probably go for the more direct option of buying gold coins.

Update: I have done a more recent comparison on gold ETFs and that data can be found here. 

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{ 228 comments… read them below or add one }

Samruddha Salvi November 14, 2011 at 7:23 pm

well, Gold ETF is the easiest available way of investing in the gold, at the same time the tracking error of most of ETFs is negligible.

In order to invest in gold etf one can go for the IPO route, or can buy them directly on exchange through broker, But gold ETF can also be bought directly from the Fund house, provided the investor buys minimum of 1000 units.

Source:
http://www.reformistindia.in/2011/11/14/what-is-gold-etf-how-to-invest-in-gold-etf/

Reply

krishna kant November 17, 2011 at 11:26 am

what is gold eft scheme and how to invest in this scheme .
if locking period in this scheme. return %

thanks

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vasant February 5, 2013 at 2:11 pm

i am a beginner

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shinaj November 22, 2011 at 4:04 pm

Can you please do a an analysis of the best Nifty ETF in India based on the expense ration and performance(C.A.G.R)

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shinaj November 22, 2011 at 4:05 pm

EXPENSE RATIO

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Manshu November 22, 2011 at 7:22 pm

Here is a post that I’ve already done about that Shinaj – I think you will find it useful.

http://www.google.com/url?q=http://www.onemint.com/2011/10/11/comprehensive-list-of-nifty-index-funds-and-etfs/

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Ramesh January 9, 2012 at 1:24 am

I understand that Gold ETFs are available online both at NSE and BSE. There is always a little price difference. So I think we should buy whereever the price is lesser and sell wherever the price is higher. Am I right? Or is it that if we buy at BSE we have to sell it at BSE only? Is liquidity different in the two exchanges?

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Manshu January 9, 2012 at 2:59 am

You can do that if you see a price difference though I wouldn’t expect it to be much of a price difference at any time because that will create a good arbitrage opportunity. How much of a difference have you normally seen?

Liquidity is different in different exchanges and I suspect NSE to be more liquid for Goldbees trading than BSE though I have never seen the numbers.

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Ashish September 10, 2012 at 8:07 pm

Its the other way round BSE is more liquid than NSE in Goldbees .

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Ramesh January 9, 2012 at 6:12 am

Thanks Manshu.

if we can choose to sell them at either of the two exchanges, both price variation, however small and liquidity difference if any, should be of no concern. hope I have understood correctly.

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Manshu January 9, 2012 at 8:38 pm

That’s my understanding yes, though I have never actually done this myself, so I have no practical experience in this. I’ve always bought and sold on the NSE.

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Ramesh January 9, 2012 at 11:14 pm

thanks Manshu.

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Afollower February 6, 2012 at 9:04 pm

seems equity is getting a silent bounce back ( 2012 Feb month, the time I posted ths msg :) , in my POV, we must avoid GOLD and SILVER investment for now ad start looking equity for cherry pick. A detailed technical analysis can be found here:

http://arthaplanner.com/one/

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ritesh patel January 30, 2013 at 4:42 pm

can i have your mobil no.

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sun April 24, 2012 at 7:29 pm

i read about gold bees fund run by goldman sachs.
goldman sachs is a foreign bank/company.
what our the risks and implications of such a company if it goes bust like lehman brothers or mf global.
secondly returnwise which gold fund or etf gives high percentage of return annually
regards

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Jitendra P.S.Solanki April 25, 2012 at 10:50 am

Sun
ETF structure is same across all companies and hence the returns are almost similar.The only difference come sin tracking error which is high in some funds.Look at this figure and you can select a fund with ow tracking error.

Gold Bees Fund was launched by Benchmark which is now bought by Goldman Sachs.I don’t see chances of it going burst like Lehman as there has been heavy regulation on it after the Lehman fiasco.Moreover MF structure is different from Investment Banking. Even if it has problem worlwide it will sell its assets in India like lehman did in most part of countries.

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anil shukla April 28, 2012 at 11:47 am

Hi
I am anil, Idont know how to invest in SIP in gold etf but i want to invest. So please guide me
1.how to invest and how much i invest in gold etf.
2.which points should remember when investing and what are the risk points.
3.which is the best gold etf.is sbi gold is good.
4.is any charges for entry or exit.and how much long time i can invest.
Thank U.

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Manshu April 28, 2012 at 6:23 pm

If you wanted to set up a SIP in gold ETF then you can buy a gold mutual fund which in turns invest in gold ETF. There are many like that. The biggest risk is if gold prices went down, then the price of the gold ETF will also go down. All ETFs are similar in nature GoldBeeS has low costs and is the biggest, but if you wanted to do a SIP then perhaps you should choose something else. Normal brokerage charges apply.

How much, good or bad time to invest is a question that you have to answer yourself because that’s your take on whether gold prices will continue to rise or not.

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sun April 28, 2012 at 10:59 pm

thanks jitendra solanki for the answer.

what is the general average return of gold etf funds annually in percentage?

regards

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Manshu April 29, 2012 at 3:55 am

For what time period sun?

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Jitendra P.S.Solanki May 1, 2012 at 10:29 am

Sun,

Gold ETF have been able to produced 20+% returns in last few years.

But then there is a strong misconception that gold will continue producing these returns.In next few years you shoudl not expect repeat of thsi performance unless gold really carshes an dthen ris eagain.

I personally beleive when you are investing for inflation hedge you should expect 9-10% return from this asset class in long ter,.In short term its not more than a commodity which have its risk return characteristics.

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sun May 1, 2012 at 2:21 am

12 months time period for 2009-1010, 2010-2011, 2011-2012,

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Salil Dhawan June 8, 2012 at 12:46 am
A.Mohamed kamarudeen September 27, 2012 at 9:38 am

Thank you

Reply

A.Mohamed kamarudeen September 27, 2012 at 9:41 am

Please send me important gold invest messeges.

Reply

Leonard October 15, 2014 at 5:11 pm

HI,

i am planning to open gold ETF.

Assuem i opened XXXX Gold ETF for 2 years and i have some amount of in ETF. i would like to know after the maturity date shall i redeem physical gold coins for that amount?

Reply

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