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
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.
You may also like:
- Tata Gold Fund: Gold ETF for Indian Investors
- SBI Gold ETF
- Gold ETF in India
- ETF List
- India ETF List — ETF Traded in India
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Hey Manshu,
You have not yet responded on the comment of HDFC Bank gaining sharply where other ETF fund decreased. Also a follow to that comment. If you can provide your expert opinion on that then I think I am ready to invest in Gold BEES (or HDFC ETF if your opinion changes
)
Thanks
Shiva
Hey Shiv – sorry about that. Got busier than usual and couldn’t look into it. Your comment is timed well because NSE has released its monthly ETF report, and they report that GOLDBEES has returned 3.80% last month whereas HDFC has gone up by 3.77%. However for the last 3 months both have returned exactly the same viz. 0.35%.
So, I think whatever you saw was an aberration and in the slightly longer term it got smoothened out.
Having said that – I see you’re giving good thought on the instrument, but have you given good thought to gold as an instrument itself, and how it fits in your portfolio, and with your goals?
Thanks Manshu for the response..
Since I have a baby girl, my main intension is to invest in Gold at regular intervals for her marriage. Having said that, I would be investing around 3-5k per month on a average in Gold ETF. I will also balance out it with physical gold purchase from time to time.
What do you say ?
So the best option would still be Benchmark Gold BEES?
Regards
Shiva
In my personal view I don’t see much merit in anyone holding more than 5 – 10% of their total portfolio in gold. The retail interest and steep price hike in gold in the past decade or so has more or less rendered it as just another asset class. People have forgotten that for about 3 decades gold prices stagnated, and there is no reason why that can’t happen 5 years from now.
would like to invest in gold sip can a respesentative of hdfc can call me
i like invest in hdfc
pl cal me 9565510066
Hi,
THanks a lot for the valuable information. Can you please let me know as of TODAY (24th March) which is the best Gold ETF? Does the status of Nuumber 1 for GOLDBEES stand even for today?
Regards,
kiran S – 9986043327
I don’t see anything which makes me change my opinion.
Manshu has done some serious analysis on Gold ETFs and i also agree that Benchmark AMC should be the best option for investing in GOLD ETF
Reasons
Lowest expense ratio
Hishest Liquidity for buying and selling
Pioneer in ETF in India
Recently acquired by Goldman Sachs so can expect much more improvement in the Indian ETF space
Goldman Sachs..!!!!!
Yikes!!!!!
Thanks a lot Manshu, very valuable information shared with the public. Helps the public!
Hi,
Your post is pretty good. I am looking into investing some money in electronic gold. In the comments section you have mentioned E-Gold and E-Silver. What is the difference between Gold ETF and E-Gold. If both are the same, what is the use of the ETF where one has to pay for managing the fund. Do you have any comments of E-Gold and E-Silver?
Regards,
Shankar
Thanks Shankar – both are not the same. In fact you will have to open a separate trading and Demat account for transacting in E-Gold. Here is a detailed post I wrote about it some time ago which you will find useful.
http://www.onemint.com/2011/01/13/e-gold-and-e-silver-from-nsel/
Hi manshu,
I just read your Explanation on the best ETF and I should thank you for the detailed information and the analysis to justify your viewpoint
howevere your article also states that you would take the direct option of buying gold coins if you had plans to invest in gold
My question is: Would you suugest that buying gold coins is a better option than buying ETF, if my idea is to save in Gold for my Daughter?
Kindly let me know
venkat
The final decision is up to you, but if the final objective of the gold is to make jewelery then I myself would prefer to buy gold from a reputed or known jeweler and then exchange it for jewelery when the time comes.
Hi
I do apreciate a father’s concern for his daughter’s wedding.
However gold etf has certain benefits
Even if you buy gold coins or bars, there would always be an extra premium for making them
Banks do not buy back physical gold and jewellers most of the times only exchange, so in case your daughter asks for a house over gold, it can become difficult for you to get the right money for your gold
No worries of theft in case of ETF and also save on locker charges
In case of ETF, you can aslwys track your investments in real time
We all know how jewellers fool us by reducing gold in wastage or impurties during the time of transformation to actual jewellery.
Dear Venkat,
Before you decide on Jewelleries or coins or ETF, suggest also have a look at E-Gold and E-Silver as an Long term investment. I am sure you will not regret it. Write to us at buyegoldesilver@gmail.com for more details.
Dear Manshu,
I am new to gold etf.
I purchased 1 unit of reliance gold etf last month.
I have a doubt about the selling of these etf
1.can i get cash or gold against selling this ?
2.how much tax or charges i have to give at the time of selling?
1. Yes, you will get cash, and that’s the only thing you will get. You can’t get gold against it.
2. If you make capital gains on it and you’ve sold it within a year then its taxable at 15%.
Quantum offers the best ETF when looked upon holistically.
They have one of the lowest charges.
They have got the GOLD stocks checked phycically by an independent company (which is BV certified) and have the cert updated on the website as well.
I have invested myself in that and I have done my homework before that, I just wanted to shed some light over these facts and wanted to help you in making an informed choice.
Might seem very trivial. I have a demat account(opened only for getting the 80CCE infra bonds credited). Now I’d want to buy a gold ETF, cant I do so without a trading account?
Reason is I wouldn’t use the trading account for anything so why pay up another Rs800p.a. on that while any direct investment (IPO, FPO – actually even this is possible through ASBA; only secondary market buying may not be possible without a trading account) in the stock markets by me would only be passive
Nav – As far as I’m aware you can’t buy this without having a trading account. There may be an option that I’m not aware of but I have never heard of something like this.
Thanks Manshu! Might have to go the Fund of Funds way but again expense ratio climbs up there as well:)
Hi Nav
They are many brokers who are offering lifetime trading + Demat AMC free by just paying an amount much lesser than Rs 800.
Also you can apply for an IPO and FPO through ASBA, however if you want to sell those stocks you need a trading account.
Funds of funds has always been an expensive and a complicated product worldwide.
Also the infra bonds you have invested in have an option of selling in secondary markets in case you need money before the maturity date.
Having a online trading account would be beneficial as in future all the financial products including insurance also would be bought and sold through trading accounts only
Thanks Puneet for the advice!
btb any suggestions rgding preferred brokerages for a passive investor.
I have online account for buying and selling of shares. buy this same account can we buy the gold. shall i get gold or amount after selling the gold thru online dmat account.
thanks & Regards
Yes you can use the same account for gold ETF & when you sell it you will get cash, not gold.
@Manshu
Gold Rate 1950 – 50/gm
Gold Rate 1975 – 500/gm
Gold Rate 2002 – 5000/gm
Gold Rate 2011 – 22000/gm
On what basis are you saying that Gold rate has “stagnated”????
Show me another asset that has grown by 50000% in the last 60 years??!!
People, forget etf and other shares/stock junk these people get you to buy, only 3% ordinary people make money in it, the other 97% are the companies and these agents who cash in.
Buy gold every month, as much as you can afford, when you have enough in a few years, buy a flat ANYWHERE in the city, you cannot go wrong, you will be giving the greatest returns to your children.
Simple story – My grandfather bought a Rs. 2,00,000 house in Bandra Reclamation (One of the costliest suburbs in Mumbai today) in 1984, today, the flat’s price is a staggering Rs. 4,500000!!
What stocks, What shares?? Forget the gobbledygook stuff. Instead buy actual gold, save enough, and then buy land/flats.
Those 2 things will only and only increase in price and demand, but not in supply!!!!
And one last thing, now that you people will blast me with comments, let me just state one last benefit of land and actual gold. It is in my hands!!!
Your etf’s, shares, your money and other “portfolio items” are in the hands and control of someone else, someone who is beyond my control! 1 scam, 1 hack and all my money is gone!
Regards,
Am
yes reply i give value 2 your suggestion.
I really agree with you.
risk is always a factor for physical gold
@Am:
Accepted that gold has risen by over many many times over the past decades, but isnt it all in hindsight that we are making decisions for the future? If one can connect the dots looking fwd, then one’s genius. Its like saying that “today’s education system is gonna prepare kids in their careers for the next 30 years(while we dont know whats gonna happen inthe next 5 years” (Courtesy: Sir Ken Robinson))
We are speaking of a trend across 60 years..but the lifespan of an average investor(atleast one who is risk-averse) I guess would be about 30 years? And during that period, a single huge drop or even a few drops can erase a lot of capital which may not go back to the previous levels over the lifespan of the investor (The Gold, Silver crises in the 1980s, The Japanese index(Manshu hasa post on this I guess), the sub-prime crisis are all cases in point) Also to be considered is “when” the investor will need the money to reach goals and not the other way round(cashing in during bull runs or fleeing during bear phases)
Am not a proponent of any one asset, but to keep all eggs in one basket(even if its spread across a large time period like SIPs ) is kinda risky I suppose. Dwelling on this aspect in a few chapters is Taleb’s book “Fooled by Randomness” which is a good read .
Just wanted to share a few thoughts.
Hi,
if some body can help – I hold 06 gold coin of SBI and now i want to sell. whom / where should i contact to sell those gold coin
You will have to sell it to a jeweler – go to a few near your place and see who offers you the best rate.
Can you tell me what the expense ratio is. Suppose, I have Rs. 1,00,000 in hand. And at the end of 5 years, let’s say gold price is doubled. If I invest in physical gold through trusted jewellers, I will be getting back Rs. 2,00,000 roughly. But I am not sure how much will I get through ETF. Can you calculate the effect of expense ratio, which is 1% for most of the ETFs.
Thanks.
The expense ratio is expressed as a % and if you have 1% expenses then at the end of 5 years – 5% will be reduced from the returns. I’m still to see a comment here from someone who has had no problems or deductions while selling their gold back, so personally I won’t feel very confident about getting double the money if the spot gold prices doubles.
it’s true that jewellers don’t offer exactly the price of the gold,when u go to sell it.
Firstly,they often deduct the weight and you cant challenge thm on tht.
secondly, if u sell coins they are nt willing to purchase coz, they wont make mch out of it,they say that if u want to purchase or make jewellery they have say price(current rate) whereas if u want cash they deduct around Rs.200-300/gm
thirdly, you cant be sure whether 10 yrs from nw the same jeweller will be available.May be he shuts his shop or his children don’t wish to continue as jeweller. Other jeweller wont pay good enough for jewellery or coins purchased from someone else.
@Amit,
Buy Gold coins from Reputed Jewellers like Khazan Jewellers or Reliance Jewels. They will buy back gold coins from you and also exchange for jewellery. You can also take cash incase of Reliance Jewels. I happen to have invested in 12 months montly gold purchase scheme of Reliance and I have a Chance of buying jewellery or coin. Beware of the rising gold prices.
regards
Can you please explain why there is a difference in per unit value of various Gold ETFs even if they are representing (say) 1 gm unit of gold? Is it only because of the expense ratio?
Secondly, based on today’s data (20-May-2011), price of Axis Gold ETF is Rs. 2175 but price of Gold Bees is Rs 2137. Why is there so much of a difference? Does it also mean that apart from gold, the funds may hold other assets like bonds, etc?
Based on above, would Axis ETF be the best gold ETF to buy?
Regards
Tarun
Tarun – I have an entire post on the topic that should clear your doubts. It can be found here:
http://www.onemint.com/2011/02/15/why-do-different-gold-etfs-have-different-prices/
I dont know more about this gold funds or gold bonds, want to invest if got clear all concepts.
You can read this link and see if you understand. It’s a broad topic so difficult to explain in a comment, but you can get started here:
http://www.onemint.com/2009/10/23/what-is-an-etf-2/
Hi
I’m planning to invest on gold, can u give me a projection of hike in gold price the next 5 years. is it safe to invest on gold today. also suggest us wether to purchase on ornament or gold coins/bis’ts.
thx
I’m afraid I don’t know what will happen to gold prices tomorrow, let alone 5 years from now.
If i hv to invest in Gold EFT where should i invest
GOLDBEES is a decent option.
I do not want to buy physical gold but to buy through exchanges on monthly basis.
What is the way ? Can you name a few broking houses who can help ?
I already have a dmat account.
Do you have a trading account as well? If you’ve ever bought shares, then you can buy ETFs in the same way through the same trading account. There’s no need to go to a special broker for that Sukumar.
Hi,
Can you pls help me out how to buy GOLD ETF ( Reliance …)
Mahesh – it’s done just like stocks, if you have ever bought shares and have a Demat and trading account, you can buy ETFs in the same manner. Have you ever bought shares?
HI Manshu,
The post is really useful. I have also read your post here http://www.onemint.com/2009/09/07/gold-etf-in-india/.
In your research you mentioned the expense ratio of Gold Bees is less(1%) compare to other ETFs. I have gone through the document in the following link and it indicates the expense ratio of Gold Bees is also 2.5% – http://www.benchmarkfunds.com/Documents/SID_ETFs.pdf
There is no link to sebi site in the post “http://www.onemint.com/2009/09/07/gold-etf-in-india/”. Hence I have gone through their website. It looks like some ETFs like Nifty Bees, Bank Bees alone have 1% as expense ratio.
Please clarify, Regards.
Hi Karthik – I think that document is dated; if you go to their page here you will see the rates.
http://www.benchmarkfunds.com/Products/GoldBeES/Overview.aspx
Hi Concern,
I just want to invest on monthly basis in GOLD.
can u please help me to invest in GOLD and also confirm how can i invest?
What is GOLD EFT, is it best option to invest in gold?
Sunny,
You can invest in gold ETF just like you invest in any other shares. Have you ever done that? Benchmark GoldBees is a good one that you can try out.
Hi Manshu,
Thanks for your early response.
Actually, this is a first time I am trying this type of investment.
Hope I am going on right way.
What are the formalities to start the same by Benchmark GoldBees?
There are no special formalities, you just have to get a trading and Demat account like you would do for shares, and you are set.
Excellent work Manshu. I was researching for info on gold ETF and your articles saved me a lot of time.
That’s awesome! Thanks a lot for your comment! Look at some of the other stuff here and it might just be of interest to you as well. If it is then you can subscribe to the free daily newsletter using the box at the top right. Thanks again for your comment!
Hi Manshu
is it possible for you to update the graph on this page to show data as per 2011 ?
thanks
Sure, will try to get it done this weekend.
manshu,
on online trading acct, gold etf fall in eq segment, but they also have an expense ratio which is the feature of mf. so if investing in gold etf we end up paying expense ratio of 1 % as well as brokerage. at the same time if we try to invest in fund of fund like reliance gold savings fund, we end up paying expense for this gold fund as well as underlying gold etf. so, expensewise investing in gold etf or gold sip is far more expensive than shares. is my observation correct.
Pankaj
Pankaj,
Your description of costs is accurate though comparing mutual fund / ETF costs to transaction costs is like comparing apples to oranges to me. I feel that way because MFs, or ETFs are products that charge expenses to allow individuals the ability to buy a whole host of stocks or commodities that they ordinarily can’t buy themselves.
Manshu,
Thanks.
what do u feel is better, SIPing into reliance gold savings fund/kotak gold fund OR buying into gold ETF through my online portal. My time frame is 10 years and I want to buy gold worth 5k every month. I seek advice in terms of cost incurred and security of purchased units.
Pankaj – In terms of cost Benchmark Gold ETF is the cheapest for expenses. You can look at how much brokerage your broker charges, and if it’s not a whole lot then buying the gold ETF and avoiding fund of funds is definitely better.
In terms of security, since mutual funds also eventually buy gold ETFs (something which many people aren’t aware of) so you don’t get any additional security by buying a gold mutual fund.
Hi Manshu,
Hope u dng good..
Heard Gold man sachs have taken over GOld bees now..from 14th july..I have invested in Gold bees & wanted to continue with it..but now since GoldMan Sachs has taken over, wat would be the impact on Gold bees..Gold Man sachs is Investment banking & their stock would not always reflect the gold price..as Gold Bees would invest 100% in Gold.
Please provide an update if u have on this..or do i need to diversiy my portfolio in SBI gold etfs..
Hi Rohit,
I’m good, how are you doing?
Goldman Sachs taking over Benchmark won’t impact the price of GoldBees. The gold ETF will continue to be priced according to the gold stocks it has. So, you don’t need to make any change in strategy just due to this ownership change.
hey there i have a question regarding gold etf . in 2007 my uncle had invested in UTI Mutual Fund – UTI Gold Exchange Traded Fund.he purchased 41 units.now my uncle passed away last month. my aunt has no knowledge of stock markets and neither do i . i want to know if my aunt should sell it or not and if yes how much does she get by selling it
Hi Samir – Gold ETFs follow the price of gold, and move up if gold prices go up, and move down in gold prices come down, so people who think that gold will go higher in the days to come won gold ETFs.
topic very informative
Hi Mansukh
I like you blog very much, it gives us lot of knowledge.
I was confused in one thing, I read somewhere that one gold etf of goldbees is equal to one gram of gold. Correct me if I am wrong.
But when I see goldbees current rate is Rs 2209.30
Where as the gold MCS Rate is Rs 2308.2
Which means the goldbess is Rs 98.9 discounted as compared to the MCX rate. Why is it so ?
Can you kindly guide me for the same.
http://www.nationalspotexchange.com/Investment%20Products%20in%20Commodities-%20A%20New%20Paradigm.pdf – The slide titled ‘Alternative Assets Comparison’ lists the Return Potential of Gold as ‘Medium’. Any comments from users here on what the historical rates of return have been or what’d be a realistic return to expect in the short/long term?
Hey Mansukh,
I would like to invest in physical gold and want to purchase 100 gms of gold bar, do feel this the rite time to invest or you suggest me to wail for few days.
Regards,
Monish Agarwal.
I really have no clue on what a good time to buy gold will be. I wish I knew, but I don’t. Sorry.
no time is bad to invest in gold. I feel one shud be clear as to wat for is he investing and hw mch can he hold.gold has not dissapointed investers even during recession times
Hi Mansu,
I have monthly SIP of 16,000/- Rs. in MF and I would like to invest in GOLD ETF @ 10,000 Rs./month.
Is it write time to open SIP for Gold ETF?
Other then Term plan/PPF investment, my total investment through SIP route only which fulfill my goals of education fund for my son and retirement funds after 20years. I am 38years old and i have started my SIP 11,000 Rs. since June 2008 and additional 5,000Rs from June’11.
Please give comments and investment plan if better then this.
Plese adivse hoe to invest in gold etf in current market senario.
I am going to start Gold mutual fund Through SIP, let me know adavantages and dis adavantages of this. Kindly advice.
I have found your articles and Blog very informative. I have never invested in Gold Fund / ETF so far, and mostly invest in MFs through SIPs.
Please tell me is it worth investing subscribing in SBI gold Fund NFO which is open right now,? Or is it better to invest in Gold BeeS / Quantum fund?
Here is a detailed review of SBI gold fund that I did some time ago and you can read the post to get a perspective of how these things work.
http://www.onemint.com/2011/08/24/sbi-gold-fund-review/
Its September now and Gold has again reached new summits. At this price, are ETFs (or physical gold for that reason) still a good buy? I think Yes, because the world economies are plunging day by day. At the same time, sceptics say there’s a Gold bubble forming.
Please share your views on a fresh investment at this stage.
I’m afraid I don’t have a clue on what’s going to happen Conan. I have been staying away from gold since 2008, and have missed the 100% price gain, so I’m certainly not the right person to say what’s going to happen in the next few years with gold prices. I have chosen to stay away myself because of the huge run up in prices, and interest, and that scares me as it reminds me too much of the real estate stocks or the IT stocks before them.
I am going to invest gold mutual fund through SIP. let me know the advantage and disadvantage.
hi mansu
cud u plz clarify whether expense ratio is annual or one time only
thanks nd regards
It’s annual Pawan.
Dear Manashu,
You r genius having a sharp knowledge about gold etf i have read your various comment/reply I am new investor as Shiva I have daughter of 1.9 years and I am preparing for her marriage and education kindly suggest me option for investment I can invest 2-3k per month and best way to purchase gold Etfs and also risk factors , probable benefits would get in 2025 years.
My Email ID lka_1975@sify.com
Well, if you have to start with 2 – 3k only then just gold may not be wise for you – mix it up by investing in a mutual fund a fixed deposit investment and then a gold ETF or if you don’t have a Demat then gold mutual fund since I guess you are looking to buy some gold with this money. Mix it up well, and don’t expose yourself too much to just one type of asset.
hello manshu,
I am following your website since 2 months and i would like to ask you one question
can you tell me the best investment to put money monthly 4k or 5k.
I am 24 yrs old and want to earn money through mutual funds, gold or silver…
Can you suggest me…
There is no such thing as a best investment! It all depends on what your risk taking ability is, what your goals are, how long you can hold on to your investments etc. If you are young and starting out then I’d say having a mix of diversified mutual funds and fixed deposits is a good thing to start with, but there is no short answer to the question you are asking.
TQ for your reply.
Can you please suggest me some mutual funds in gold silver
There isn’t any silver ETF in India, and for gold there are several ETFs listed in the list on this post itself that you may select.
What is the best substitute for physical gold? I am not too keen on investing in golf MFs as performance will depend on tthe fund managers. I want virtual gold which I can buy at market price and sell at market price just like buying and selling stocks. Do ETFs meet my requirements?
No, they don’t and you need to get more familiar with gold mutual funds also. They just own ETFs nothing else – they are not actively managed like you presume.
Hi Manshu,
I have learnt much from this page on ETFs, gold, etc. Right now, I have about 10 L in SB account (NRI). I want to put it to good use. I dont have DEMAT account, I wont be coming home until Feb next. I would appreciate it, if you can give me some idea of where to invest.
Balaji
If you don’t have a Demat account, and are out of the country then probably the most effective way for you to get returns on this money is to open a fixed deposit and take advantage of the current high interest rates. That way your money will generate better returns, and when you do get back you can get things set up.
I know that ETFs are best in case of long term investment But what is the best way of buying gold in case of wedding say due to 6-8 months? Physical gold or ETF. And from where i can buy.
Dinesh – for such a short term try looking for some jewelers who allow you to lock on to today’s rate if you set up a plan with them to buy in the future. In some cases they give good discount also. Check with people in your family or neighborhood to see if any such deals exist where you are.
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