#HowDoes #GoldETF #Differ from #GoldMutualFunds?
#HowDoes #GoldETF #Differ from #GoldMutualFunds? https://dailygram.com/index.php/blog/1165160/how-does-gold-etf-differ-from-gold-mutual-funds/
How Does Gold ETF Differ from Gold Mutual Funds?
Exchange Traded Funds (ETFs) and mutual funds are similar to each other in many ways. Both are considered a good choice to diversify investment portfolios. Both also offer flexibility, especially with withdrawal options. Having said that, there are some key ways in which these two investment vehicles differ. Here’s what you should know about gold funds vs. ETFs.Difference Between Gold ETF and Gold MFBelow is a comparative analysis of both the funds to help you understand better and choose the best option to invest in.Gold ETFsGold Mutual FundsGold ETFs are passively managed instruments that invest in pure physical gold with 99.5% purity. This gold is sourced from banks approved by the Reserve Bank of India (RBI).Gold mutual funds are open-ended schemes. They could even invest in Gold ETFs. But the aim is the same as that of ETFs, which is to generate income by investing in pure gold.With ETFs, the investment in gold is in a dematerialised form. So, you will need to open a Demat account to invest in gold ETFs.A Demat account is required mandatory to invest in mutual funds.Only lump sum investment is allowed. No provisions for SIP.Mutual fund investments can be made as a lump sum amount or through monthly, quarterly or yearly instalments, via a Systematic Investment Plan (SIP).The minimum amount of investment is usually 1 unit of the ETF, which is equivalent to 1 gm of gold at the current price.The best financial institutions allow investment to start with as little as ₹100 per month with an SIP.ETFs are listed on the stock exchange and can be traded only during market hours.Although not listed on a stock exchange, units in a mutual fund are bought or sold on the net asset value (NAV) for the day, which is similar to the share price of a company.There is no charge for exiting the scheme.With gold mutual funds, you might have to pay exit load charges if you decide to withdraw partial or complete funds before the maturity date.Gold ETFs can be easily converted into physical gold.No such facility is available with mutual funds since investments are not directly made in physical gold, only gold stocks and ETFs.The major costs while investing in Gold ETFs are the Demat charges, expense ratio and brokerage charges. Combined, the total charges are between 0.5-1% of the total fund invested.Mutual funds include the gold ETF charges along with a nominal charge for managing the fund. The total charges are close to 0.6-1.2% of the total traded funds.Wrap UpAlthough there are major differences between gold ETFs and mutual funds, both are considered a viable alternative to investing in physical gold. Not only do you not need to worry about the safety of the physical gold, you also don’t need to bear the cost of safely storing the precious metal. In addition, gold mutual funds provide the combined benefits of ETFs as well as professionally managed funds. This means you don’t need to have knowledge or experience of the financial market to start investing. So, start your investment journey early to gain maximum benefits.
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