2 Year Returns of Existing Gold ETFs

by Manshu on June 26, 2010

in ETF

I read that HDFC is coming out with a new gold ETF, so I thought I’d check out how the existing ones are doing, and see what is the difference in returns between the gold ETFs that are already present in the market.

I went to the NSE website, and looked up the closing prices for all 7 existing gold ETFs for the past couple of years.

Here is how they have moved over the past two years.

image

As you would have probably expected, the prices move quite close together, and you can hardly notice any difference between the ETFs.

Next up, I did a chart of the absolute returns of the gold funds that have been in existence for the entire two year period.

Here is how that looks.

image

GOLDBEES does the best (and it does quite well in volumes also, as I mentioned in my best gold ETF post), and that is due to the fact that its expenses are lower than the competitors. More competition is always good for the customer, but unless someone comes up with an ETF with expenses lower than GOLDBEES, I can’t imagine them to be the best on this chart.

{ 101 comments… read them below or add one }

Ganesh July 1, 2010 at 3:15 am

Dear sir,

Your website is very interesting and giving lots of information about gold ETFs. You have talked about expense ratios of the different gold ETFs and have mentioned that lower the expense ratio leaves good returns for the investors. How to find out the expense ratios of HDFC gold ETF and ICICI gold ETF? Is any of these funds attactive than Gold BEes? Is there any advantage in investing in gold ETFs during NFO period?

Thanks a lot in advance for your valuable comments.
Regards,
Ganesh.

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Manshu July 1, 2010 at 11:43 am

Thanks Ganesh. Both these funds have an expense ratio of 2.50%, and to the best of my knowledge – there is no benefit of subscribing to a mutual fund during its NFO period.

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Ravinder July 6, 2010 at 9:59 pm

Thanks Ganesh. Your article is quite educative. I am sure that I coming days more and more people will be benefit from your experience and writings.

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K Ravi Shankar July 13, 2010 at 11:10 pm

What is Expense Ratio ? What is its role in Gold ETFs ? How does Expense Ratio link/ affect my investment in Gold ETFs?

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farook deen July 18, 2010 at 7:44 am

I would like to invest about 1 lakh in Gold shares in India.Please advice which shares can give me best returns..

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Manshu July 20, 2010 at 3:52 pm

Gold shares – you mean companies that invest in the gold business or gold ETFs?

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farookdeen,a September 12, 2010 at 7:48 am

ETFs

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Vijay Jain April 9, 2011 at 9:39 am

In fact I would advise you to consider your investment in E-Gold and E-Silver as well before only thinking in terms of Gold ETF.

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RAMAN KUMAR July 28, 2010 at 1:53 am

Very Good Research. Thanks for providing such data.

Regards

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Shameek July 30, 2010 at 10:01 pm

Hi,

Most of these ETFs are Dividend schemes, except for SBI Gold ETF & Quantum Gold ETF. In Mutual Funds, I opt for a Growth fund because it’s returns over a period of time are much better than that of a Dividend fund.

Does the same principle apply for Gold ETF s as well?

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Manshu August 1, 2010 at 7:23 am

Shameek, I did a comparison on two year returns on these gold ETFs and here are the results. http://www.onemint.com/2010/06/26/2-year-returns-of-existing-gold-etfs/

This data throws light on how these ETFs have performed with respect to each other.

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prasad August 16, 2010 at 10:08 pm

Sir i am having demat account can you let me know how can i invest in ETF , can i buy this through demat account or can you give your suggestion as how to buy this and can you let me know which time i should buy this ETF

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manish gupta August 25, 2010 at 3:16 am

dear sir, I want to know that, Can a persons can do BTST( buy today and sell tommorow) in gold etf.
second question is that , I want to invest in crude oil etf can you suggest any name for crude oil in india.
regards
manish gupta
mobile:-9211553555

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Manshu September 26, 2010 at 1:13 pm

Manish,

There is no crude oil ETF in India currently. Some time ago ICICI Prudential had launched an NFO for Oil Fund, but that never took off either. So, to the best of my knowledge there are no oil funds in India.

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rishi sharma August 27, 2010 at 1:21 am

Hi,
I am planning to invest in gold ETF. I would like to know if there is any entry or exit load for investing in gold etf.
Rishi

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Manshu August 27, 2010 at 3:49 am

This is like a stock so there is no entry or exit load, but the ETFs do charge expenses like other mutual funds.

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farookdeen,a September 12, 2010 at 7:51 am

want to invest in etf gold fund.suggest me the best return fund please

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manish September 21, 2010 at 8:11 am

I want to invest in crude oil etf can you suggest any name for crude oil etf in india.
regards
manish gupta
mobile:-9211553555

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Ramalingam September 21, 2010 at 10:38 am

I am a senior citizen. I want to invest in companies investing in gold . Kindly suggest some of the probitable companies.

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Manshu September 21, 2010 at 6:35 pm

I am not sure what you mean by companies investing in gold….are you referring to jewelery exporters?

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Amar October 28, 2010 at 9:51 pm

Hi,
From the first chart, the one depicting the movement for various ETFs over the past 2 years, I understand that Quamtum ETFs deal with smaller units of gold (1/2 gram?). Do any of the other ETFs deal with smaller units? Is there any advantage buying smaller units rather than one large unit?
Also, is it better to invest in gold ETFs or gold MFs? One advantage I can see with gold MFs is that I can set up a SIP, but other than that, is there any advantage with regards to returns, redemption etc?
Thanks,
Amar.

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Manshu October 29, 2010 at 6:35 am

Hi Amar,

Let me see if I can answer all your questions here:

1. No, I don’t think anyone else has a smaller unit.
2. I can’t think of any real advantage other than the fact that you can buy with lower sums.
3. I want to address this in a little more detail so I will answer this separately later today. As for setting up SIP in ETF there are several ways of doing that discussed in this post:

http://www.onemint.com/2010/09/06/a-new-way-to-set-up-sip-in-etf/

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Manshu October 29, 2010 at 1:06 pm

Amar, I found only two mutual funds currently on offer that get you exposure to gold and both of them own companies engaged in gold mining rather than physical gold itself, so that way investing in Gold ETF is a lot different than investing gold mutual funds.

The two funds are: AIG World Gold Fund and DSP BR World Gold.

If you know of any other gold mutual funds then do let me know.

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Amar October 28, 2010 at 9:53 pm

Sorry, I have one more question 🙂
If I wish to buy ETFs over a period of time, does it help to buy from a variety of available ETFs or should I stick to just one ETF?
Thanks again.
Amar.

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Manshu October 29, 2010 at 6:38 am

Hey Amar,

The only benefit could be that if you buy one ETF and for some reason it has a high tracking error, or the fund has some other issues then by spreading around your money you are slightly safer. So that is probably one thing going in its favor.

I can’t think of anything else right now, so if someone else has any ideas on why this could be compelling please let us hear it.

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Sheela Pawar October 29, 2010 at 2:20 am

I am a senier citizen. I have demat account in ICICI bank. I want invest Rs 1 lac in Gold ETF. What is the best option? And how to go about it? Please guide.Mrs pawar

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Manshu October 29, 2010 at 6:31 am

Dear Mrs. Pawar,

The way to invest in ETFs is exactly the same as you would invest in stocks. Have you every invested in stocks? If you have then you can use the same method to invest in an ETF.

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Sheela Pawar April 4, 2011 at 9:51 pm

There is a good future for silver as rates are going up everyday.Is there silver ETF like gold ETF?
Sheela

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Manshu April 5, 2011 at 5:07 pm

No, there is no silver ETF in India. You can check out e-silver from NSEL. If you search this site for silver etf alternates and NSEL you will get two posts on those topics.

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Vijay Jain April 9, 2011 at 9:46 am

Dear Sheela ji,

In case you are keen on investing in Silver, you can invest in E-silver and also in E-Gold through National Spot Exchange. You are most welcome, if your need any help in buying or selling

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Rohit November 9, 2010 at 12:33 am

Hi ,
I have invested recently in Benchmark gold ETFS. @ price of 1923 per gm..i want to know how the expense ratio has affected my purhcase price.My brokerage & other stuff added upto 19296 for 10gms..Please let me know where are the calculations involved for expense ratio on purchasing as well as selling ETF’s.

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Manshu November 18, 2010 at 1:31 pm

Rohit,

The expense ratio will not directly be visible in your purchase price like the brokerage or STT. The expenses incurred by the funds are deducted from the NAV of the fund, and then through market activity the ETF price comes closer to the NAV.

So, though the expenses impact your purchase by the extent of 1% in this case – you can’t directly see it in the price.

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Ravi November 30, 2010 at 1:02 am

Hi

I would like to know t he gold price history of last 10 years.

How can I?

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Manshu November 30, 2010 at 4:16 am

goldprice.org has got pretty good price data on gold. Here is the link that can get you started Ravi:

http://www.goldprice.org/gold-price-history.html

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karthickPrabhu December 3, 2010 at 3:29 am

Hi Friend,

I want to purchase gold bees , what the stock code , will it listed under stocks or etfs? im using icicidirect ,how to buy through this site? kindly guide me thanks

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Manshu December 3, 2010 at 10:38 am

GOLDEX is the code for it. Go to Equity -> Buy -> Enter GOLDEX in the quote, and say get quote.

It will show you the details, and you can transact if the price attract you. Thanks!

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karthickPrabhu January 5, 2011 at 12:21 am

thanks friend.I bought today the goldbees @1991 rs but i want to track this etf thorugh any site ..im not able add this etf in my moneycontrol portfolio and when serached this etf in rediff money its showing different nav value ..totally confused 🙁

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Manshu January 5, 2011 at 12:40 am

You can track this using the ICICI Direct Portfolio itself, as that should show it once it gets delivered to you, and at the price you bought it for. That will be more convenient, as everything is already done for you.

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Sandesh Goel December 7, 2010 at 4:10 am

I have an observation which I want to share as well as validate.

Most of these gold ETF’s claim that 1 unit corresponds to approx 1 gram of gold. But, this can change very quickly. e.g. for an ETF which charges expenses of 2.5% per annum, 1 unit becomes 0.975 gram of gold after 1 year, 0.95 gram of gold after 2 years and so on. Within 20-22 years, 1 unit becomes equivalent to only about 0.5 gram of gold. To still say that 1 unit corresponds to approx 1 gram of gold is plain misleading.

Did i get this right? If so, shouldn’t there be a better way of accounting for the expense ratio?

why not create gold ETF units as multiples of Rs 10 or Rs 100, as is done by most mutual funds? That way there won’t be any pretense that a unit implies 1 gram of gold (which it clearly doesn’t).

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Manshu December 7, 2010 at 9:32 am

Since ETFs track an underlying asset they need to be based on a certain unit of that asset. So if you hold one unit of an ETF you need to know how much of the underlying you own.

Aribitrageurs are present in the market who keep a close watch on the NAV of an ETF and the market price, and trade on the market to bring the value of the NAV and trading price close together. To know the NAV it has to be based on the underlying which in this case is gold. So you need to know what does unit of an ETF represent?

This is true of any index fund, so like Benchmark Nifty Index fund represents 1/10th of the Nifty. You need to know what one unit of the ETF represents the underlying asset to know how far away the traded value is from what the ETF actually holds.

MFs are a bit different because they don’t trade in the market, and the money they get from you is used directly to buy the index in the same proportion.

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Sandesh Goel December 7, 2010 at 11:18 pm

I understand your point about difference between MF and ETF. But, you say “So you need to know what does unit of an ETF represent?”. But, my point is that we don’t know what a unit of ETS represents. Depending on how long ago the ETF was founded, 1 unit could represent 0.9 gram, or 0.8 gram or even 0.4 gram. Isn’t this an issue?

e.g. Is there any way to find out how much gold does 1 unit of Kotak gold ETF represent today?

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Manshu December 8, 2010 at 8:21 am

Yes Sandesh – that info is present in the annual report that the funds file. For example I have the Benchmark report on my hard drive here, and it shows that on March this year they had 4,663 kilos of gold, and had 4.79 million ETF units, so that way you can calculate the numbers. You can check this out for Kotak, and there might be more recent numbers out there somewhere which I haven’t seen yet.

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Vijay Jain April 9, 2011 at 10:01 am

This is one of the reason that I have been suggestion readers here to invest in DIRECT GOLD and SILVER through invest in E-GOLD and E-SILVER.

When you invest in E-Gold and E-Silver you are buying Gold in exactly 1 gm lot and for Silver 100 gms lot size.

The price in available online from 10AM to 11:30 pm online and in line with the Indian Market price . The underlying asset is in Exchange nominated VAULT and can always be exchange for physical metal anytime.

To know more, pleased let us know, we will help you in your investment

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Ravikumar December 19, 2010 at 11:51 pm

Mr.Manshu,
As a beginner in GOLD ETFs I found the information provided by you very useful.
I like to invest in GETFs as an investment in this volatile market situation&poor bank interest rates.I found GOLDBEES gave the max.2 year return from your chart.While RELGOLD is the cheapest-about Rs 57/less today.
Please advice which one I can choose for better returns.Thanks
Ravikumar

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Manshu December 20, 2010 at 11:48 pm

The absolute price doesn’t indicate if the ETF or even share is cheaper or not. In terms of expenses – Benchmark is currently the cheapest as far as I know.

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Sandip J. December 21, 2010 at 12:31 am

I am salaried employee & have taken an tax saving mutual fund, (growth option) in terms of SIP of 2000 per month & will complete 3 years lock in period this Dec, 2010..I have heard, i can take only proportinately for each & every SIP completing 3 years..So need to wait another 3 years to have corpus fund. Whats should i go for now ?? Shall i redeem proportinate NAV each month being tax free & work as Monthly income for me or other option to invest this amount again…Also can i change to dividend option ?? Also since need to nivest 2000/ month for coming time, shall i continue with same SIP or other plan ..no .Pls help me decide ??

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apoorva December 25, 2010 at 1:46 pm

if all etf claim to follow gold price in domestic markets, whey then they differ in unit price and returns?

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Manshu December 28, 2010 at 8:42 am

All Gold ETFs hold gold and other assets like debt, and they have expenses that eat up their returns also, so that’s the reason why the returns are different. At some point in time any ETF doesn’t hold 100% of their assets in gold, some percentage in gold and other in debt instruments, so the returns are not going to be exactly the same Apoorva. They’re going to be close like you see in the chart above, but not to the last rupee.

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Navleen January 1, 2011 at 9:52 am

Hello,

I have a surplus of 10-15k per month that i can put to investments. Do you think GETFs should be a good idea as i need to build a good corpus (20lacs or more) by next 5-6 years? What is the expected returns and what is the minimum amount of investments? Also, how risky is it in comparison to other investment options as my risk profile is low ? Please reply.

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Manshu January 1, 2011 at 11:53 pm

Sorry Navleen – I don’t make any individual recommendations on this site.

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Navleen January 2, 2011 at 3:25 am

If thats the case, I appreciate it. Could you just tell me, What is the expected returns, the lock in period if any and what is the minimum amount of investments? Also, how risky is it in comparison to other investment options ? Please reply.

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Manshu January 2, 2011 at 3:37 am

There is no lock in period in case of ETFs Navleen, they are just like other shares, and you can trade in them without any lock in period. The minimum investment is one unit, and the lowest is Quantum Gold ETF which trades at about Rs. 1,000 right now.

As far as risk is concerned – the ETF prices are tied closely to gold prices, and there are no assured returns, so it is risky than a bank deposit where your sum and interest is assured. In this case – there is no guarantee on the sum or growth. If gold prices go up, then the gold ETF will also go up, and if gold prices decline then the gold ETF price will also decline.

As for expected return – I don’t know that and others will tell you that gold never drops in value, and it can only go one way that is up etc. etc. but that’s just their opinion. No one knows for sure, and so I find it best to avoid into any discussion of returns from gold prices.
My personal opinion for whatever it’s worth is listed in this post, but I’ve been wrong about it the last couple of years as gold prices have gone up.

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Navleen January 2, 2011 at 5:37 am

Thank you so much Manshu.. your response did clarify doubts that i had.
Please address some more queries:
Is there any tax avoidance applicable for investing in GETFs?
Also, is there any limit to the amount one can invest?
Can a person apply threshold re-balancing here aswell? If yes, how?
Actually am an MBA student and am learning Personal wealth management so have to understand various investment options before the term end.

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Manshu January 2, 2011 at 5:52 am

There’s no tax benefit, and no cap, but I don’t know the answer to your other questions.

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Navleen January 2, 2011 at 6:07 am

Thank you so much.

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gk pharlia January 28, 2011 at 2:48 am

Dear Manshu
Ur replies r usefull.Can I REQUEST U TO INFORM HOW SECURE IS GOLD ETF.In case mismanagement like UTI did such as they do not purchase gold as desired by law &subsequently fiirm become bankcrupt .kindly discuss all possibilities of insecurity of gold purched through ETF
GK Pharlia

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Manshu January 28, 2011 at 5:31 am

The thing here is that ETFs are regulated products, and their gold holdings are audited regularly. So, if the audit doesn’t happen properly, or if the regulator fails then there is a chance of fraud.

For someone like me, there is no way to check if the audit is going to fail or if there is some other problem, so I can’t really comment on that beyond letting you know that there are audits of the physical gold, and that there is regulation of these products.

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balaji January 31, 2011 at 9:31 am

please send gold price for past two year . to my e-mail id-balajishree_2004@yahoo.com

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Manshu February 1, 2011 at 8:48 am

You need to Google that info yourself Balaji.

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gcp February 2, 2011 at 12:07 am

hi,
I want to gift Gold ETF to my just born Nephew. Is it possible to gift Gold ETF ?
For that, Can I buy ETF in physical form just like physical certificate ? and not in demat form, so I can gift easily.
If yes, then pls. let me know how to go about it.
Thanks in advance
gcp

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Manshu February 2, 2011 at 7:06 pm

You can’t give a gift o a physical gold ETF.

I’m not sure how one goes about gifting a gold ETF but that will be similar to transfer of share, you will have to figure out the details and tax implication though because I’m not familiar with those.

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shanmugam February 5, 2011 at 9:25 am

Sir,
I need to build a corpus for my child education within two years. My daughter is now in 10 th std.
Currently i am saving Rs 11000 per month thro sip in mutual funds. I am planning to invest further Rs 10000 per month that too in Gold ETF not in mutual funds,
My current saving is 5000 in BSL front line equity, 2500 BSL tax saver, 2500 in HDFC equity, 1000 in DSP black rock micro cap fund. So far accumulation is Rs 300000. Can you advice how to proceed further ?

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Manshu February 6, 2011 at 7:24 pm

I’m sorry but I don’t give out individual advice this way because I’m not an advisor and don’t have the skills to look at your situation and say what will be best for you. In general though you should diversify your investments so if one goes down the others are still intact.

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karthick February 5, 2011 at 10:48 pm

Hi friend

i have started buying goldbees 🙂 thanks for your guidance.I have bought 3 shares one at 2000 then 1970 and now 1930 rs.

Is there any risk in buying and holding etfs for long time? any tax we need to pay or is there any maximum peroid we can hold?

And also pls let me kno shall go with sip method for goldbees?
thanks in advance

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Manshu February 6, 2011 at 6:56 pm

The risk is that prices are dependent on the prices of gold, so if gold goes down then this will go down as well. Since you are buying a single unit every month, I’d say there is no need to get fancy as you can execute this trade yourself also. Otherwise the post on SIPs in ETFs has several options to do this, and then ICICI Direct has launched a way to set up SIPs in stocks also, but since they execute just market orders that can get risky.

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vanita February 8, 2011 at 11:28 pm

Hi,
As an NRI can I invest in Gold ETFs. Secondly do the same rules as investing in Mutual Funds apply to NRIs when trading in Gold ETFs.
Thanks

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vanita February 8, 2011 at 11:33 pm

Hi,
As an NRI can I invest in Gold ETFs. Also as an NRI are their any taxes to be paid if the Gold ETF is sold after a year.
Thanks

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Manshu February 11, 2011 at 4:48 am

Yes Vanita – NRIs can invest in gold ETFs, and though I’m not so sure about tax treatment they are meant to be treated like shares.

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BUY eGOLD & eSILVER February 27, 2011 at 11:19 am

Indeed a very good research work and very information discussions here.

Shall appreciate if you could have added the return of Gold Coins or Gold Bars, if invested, in the last 2 years. That will make the comparision more complete and will be able to provide a more realistic and informed decision for the investor out here

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Manshu February 27, 2011 at 2:34 pm

The difficulty in including that is the lack of liquidity and differences in how jewelers and banks add premium, and then deduct a certain percentage while buying it back. It makes the comparison less consistent, as the same terms are not available to every investor.

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Mukesh March 14, 2011 at 1:32 am

Hi Manshu,
Please tell me Gold ETF are Better then eGold of NSEL?
what are the diffrent charges and return in both kind of investments.

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Manshu March 14, 2011 at 3:30 pm

Both have pros and cons Mukesh – I’ve seen NSEL return more than gold ETFs lately, but they have a shorter track record, and I don’t quite understand how exactly they work so personally I’d prefer a gold ETF.

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mitesh March 18, 2011 at 10:25 pm

hey manshu,
i want to invest in gold etf mostly in goldbees,so when i take money back by selling etf then will it be taxable,so why to invest in etf have advantage over mfs,what will be good if i m a long term investor goldbees or in bluechip stock

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Manshu March 19, 2011 at 6:34 pm

Yes the profit will be taxable as capital gains. GOLDBEES or Blue chip stock can’t be compared directly since one is to take exposure to gold and the other one is to take position in a company.

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Satish March 23, 2011 at 11:12 am

Dear Friend,
Let me confirm is any holding charges charged by amc if I hold uti etf,sbi etf or any other etf more than one year.

Regards
Satish Rao

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Manshu March 23, 2011 at 3:46 pm

Gold ETF charge expenses that get reduced from the NAV, so you won’t have to pay anything directly, but there will be a charge that will reduce your NAV.

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Tas March 31, 2011 at 10:56 pm

Hello,
It is a very informative site especially for amateurs like me who have just woken up from their slumber & want to do some investment.

1.Would request you to provide your advice regarding investing in Kotak gold etfs. 2.Are they safe? 3.what is the return expected? (in case you have an analysis) 4.what is the minimum amount that one can invest & a minimum period by which one can expect returns on the same?
5.tax policy for it

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Manshu April 3, 2011 at 4:07 pm

1. I don’t advise individuals on this site. There is information given for all to see and then they can make the final decision based on their judgment.
2. I don’t have any special insight on whether they are or aren’t.
3. No one really knows what returns to expect, a lot of people are happy to offer their opinion on what returns to expect but it’s just that – their opinion. I don’t know what to make of it.
4. One unit is the minimum you will have to buy. Quantum funds have the ETF which represents half a gram of gold and its about 1,000 rupees so that’s the lowest.
4. There are short term and long term capital gains on sale of them. Short term is less than 1 year and long term is more than that.

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Tas April 4, 2011 at 12:36 am

Thank you for your response.

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Manshu April 4, 2011 at 4:24 pm

You’re welcome Tas – appreciate your comment.

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Shubhojit April 8, 2011 at 11:43 pm

I would like to invent 1 lakh on Gold ETF in a weeks time. Kindly let me know which has least expense ratio currently out of all ETFs.

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Manshu April 9, 2011 at 7:04 am

Benchmark GOLDBeeS is the lowest.

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raja April 9, 2011 at 12:10 pm

Dear Manshu,
I’ve been in to stock tradinf for the last one year. Now I would like to invest in Gold, silver ETFs. I’m having a demat account with sharekhan. Is this demat account is enough to buy ETFs in gold, silver? yes means what are the ways of doing it?

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Manshu April 10, 2011 at 5:34 pm

Yes that’s enough. You don’t need a second demat account. There are right now no silver ETFs in India, but you can invest in this NSEL product that gives exposure to silver.
Here is a link to that:

http://www.onemint.com/2011/01/13/e-gold-and-e-silver-from-nsel/

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AhhA April 12, 2011 at 3:15 pm

Hey Manshu,
Today, I noticed your website through Google search. What a website dude….!!!. Good Really Good.. Keep it up
I am seeking for good idea in gold etf, I have planned to invest every month (1 gram) but I worried about what to be noticed before starting to invest as am going to continue investing throughout the year until I decide to redeem it.
Yes, I have started analyzing expensive ration on each gold etf but still I have fear who will provide best returns compare to other fund houses?
Again I ask you which Gold etc is the best on all perspective because I am going to invest continuously…..
What happens when the fund house closes their deal after a long time? still confuse.

Thanks in advance,
I await for reply. Whatever the comment/suggestion I never blame anyone. So, please help me.

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Manshu April 12, 2011 at 4:53 pm

Not much has changed since I first wrote the post, and GoldBeeS still get a lot of the volume and are the lowest cost, so I’d stick to my earlier thoughts about them being the best.

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Immanuel April 13, 2011 at 5:24 am

Hi,

Is it better to invest to invest in Gold ETF or Gold Mutual Funds.

Regards,
Immanuel Lawrence.
Bangalore.

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Manshu April 13, 2011 at 3:23 pm

In my opinion buying gold ETF is better because that’s a more direct way of investing as gold mutual funds ultimately invest in gold ETFs also. Only if you’re thinking about opening a Demat account for this purpose or want a convenient way to do a SIP would it merit looking at the gold MF way Immanuel.

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AhhA April 14, 2011 at 4:39 pm

Dear Manshu,

First of all thanks for your comments. I still didn’t get clarified on gold etf.
I understood the following very well because of your website:
Q: How to buy gold etf?
A: With the help of Demat account (I mean DP)
Q: What would the fund house do with our money?
A: They buy gold and manage it.
Question:
1. As I requested you earlier I have fear on how many years they might maintain our gold etf?. Example: If I buy gold jewellery I knew that I can keep with me as long as I can until I sell. but
A) What happens if my bank closes who helped me to invest in goldbees?
(where can I go and ask????)
or B) What happens when fund house shut down or bankrupt?
(where can I go and ask????)
Might be the above asked questions are irritates or silly I want to know this clearly because I repeat that am going to invest in gold etf everymonth for my daughter’s future (Just Born).

Please Please help me!!!!!!
As gold etf price is going high I think must take decision soon.

Thanks,
With Regards,
Ahha

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Manshu April 14, 2011 at 5:15 pm

I’m not sure what happens if the fund house shuts down or becomes bankrupt because that hasn’t happened yet. They are supposed to keep gold as underlying of the fund units so theoretically even if they go bankrupt you should have underlying gold to back up that investment.

However such a thing has never happened so I can’t say for sure what will happen if a fund were to go bankrupt.

If the bank closes then that doesn’t affect you as you just carried the transaction through them and the fund house still exists.

If you are looking to hold it for such a long term then you can think about buying physical gold from a jeweler of repute, and store it in a locker.

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AhhA April 15, 2011 at 2:02 am

Dear Manshu,

Thanks for your kind answer. 99% doubt of my question solved because of only you thanks for that once again. Final thing I didn’t understand your last comment
“””””If you are looking to hold it for such a long term then you can think about buying physical gold from a jeweler of repute, and store it in a locker”””””””
WHY?
So, can’t I invest in gold etf if it is for long time…..
With Regards,
AhhA
Chennai

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Manshu April 16, 2011 at 12:52 pm

What I mean is in the end you’re going to use it as jewelery and you have so many doubts now that you will probably not sleep well if you have this paper gold.

If you’re going to use it as jewelery anyway then might as well start off with buying physical gold and have the peace of mind now itself. Even in the case of gold ETFs you will sell them and buy jewelery for your daughter, so might as well buy the physical gold from a reputed jeweler and spare yourself the trouble of worrying about what will happen if the fund goes bankrupt etc.

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Vijay Jain April 20, 2011 at 7:59 am

I would suggest buy direct Gold and Silver in the form of E-Gold and E-Silver where you will have the option of exchanging with the metal as and when you want in terms of metals or even jewellery

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AhhA April 18, 2011 at 3:35 pm

Dear Manshu

Thanks for your reply. I have decided to invest in paper gold regularly.

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Manshu April 18, 2011 at 5:56 pm

Thanks for your reply – all the best to you!

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karthickPrabhu April 21, 2011 at 6:11 am

hi friend,

thanks a lot , as per ur advice i started buying gold bees , i am very happy to see its moving like anything, but i feel now i cud have bought more:)

will there be any chance for this gold bees to come below 2050 again? what your views on it, what should be the investor/traders approach this time.

I have 10 gold bees at the aevarge of 2012 should i sell or sell half of it? and buy on dips again?

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Manshu April 21, 2011 at 6:36 am

I have no input or in fact idea on how gold prices will behave. Personally, I have stayed away from gold all this time because I don’t like all the retail interest that’s built into it.

If people decide to buy gold then I say GoldBees is a good way to do that, but I don’t know how gold prices will behave in the future. They may crash like real estate stocks or keep going northwards – unfortunately I don’t have any insight on that.

If you look at all the other comments you will notice that people coming here have already made up their mind on gold prices moving upwards, and that’s their decision really.

With that in mind, I can’t provide you any answers to your questions 🙂 .

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Arun Chakravarthy April 23, 2011 at 10:03 pm

Hi,
For the past 6 months, I have purchasing the direct gold coins(22 karat 916) from the local jewellers with the 3% of wastage and 1% of VAT in addition to the standard gold rate. For every purchase of gold coin, I am paying 4% extra.

It could be much better if you provide me the best answers for my below few queries.
1)Is above method is the right and safer approach for the investment?
2)Is the % value which I am paying is reasonable?
3)For investment and for future use, which is the best and why? either 22 karat or 24 karat.
4)What is the main difference between ETFs and Direct Gold?
5)What is the advantage of ETFs over Direct Gold?
6)What is the disadvantage of ETFs if any?

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Manshu April 24, 2011 at 10:26 am

Both have pros and cons – with Gold ETFs its liquid and you can sell it any time – the pricing is transparent. Per tax – ETF is more efficient. On the other hand physical gold is something devoid of counter party risk – it also gives you the peace of mind to have something tangible in hand. You can get jewelery made if that’s your ultimate goal.

So, it depends on what your purpose with this investment is, and how comfortable you are with the idea of paper gold. It’s not for me (or might I add anyone else) to say that one is definitely better than the other without fully knowing what you intend to do with and how big a part it is in your portfolio. If you have too much of it then someone might even advise you against buying more gold and diversify into other assets.

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Pankaj May 5, 2011 at 8:48 pm

Manshu
Hi i am a salaried person and i want to invest in Gold ETF .
I want to know that they are giving units if we invest in SIP and can we take gold instead of withdrawing money for that i have to invest in physical gold .in which ETF sholud i invest Kotak or gold bees

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Manshu May 8, 2011 at 9:22 pm

Pankaj – You can’t get physical gold in return of gold ETFs. You will get money in return for it. In my opinion GoldBees is a better option and I have a full post on that here too.

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