Gold has a special place in Indian culture. From weddings to festivals, gold has been a symbol of prosperity and auspiciousness for Indians. This is the reason why India is one of the largest gold importing countries for many years in the world. With changing times, the ways of investing in gold have also changed. Now people are not limited to just physical gold – jewelry or coins, but new options like digital gold, gold bonds, gold mutual funds and gold ETFs (Exchange Traded Funds) have become popular. Gold ETFs are now seen as an easy and safe way to invest in gold.
Gold ETFs trade on stock exchanges and can be bought and sold continuously at market prices. Gold ETFs are passive investment instruments linked to current physical gold prices and invest in gold bullion.
AMFI data showed gold ETFs registered the highest monthly inflow of Rs 3,751 crore in January against Rs 640 crore in December, a 6-fold rise. These ETFs have given up to 39% returns in the last one year and around 18% annualised returns in 3 years amidst surging gold prices. Gold prices have surged by over 38% in the last one year and nearly 88% in the last 3 years.
In this write-up, we will take a look at the list of top 10 gold ETFs based on their AUM (assets under management) as on January 31, 2025.
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Following are the top 10 gold ETFs:
1. Nippon India ETF Gold BeES (AUM: Rs 16,976 crore)
2. HDFC Gold ETF (AUM: Rs 8,020 crore)
3. ICICI Prudential Gold ETF (AUM: Rs 6,993 crore)
4. Kotak Gold ETF (AUM: 6,654 crore)
5. SBI Gold ETF (AUM: 6,573 crore)
6. UTI Gold ETF (AUM: Rs 1,599 crore)
7. Axis Gold ETF (AUM: Rs 1,304 crore)
8. ABSL Gold ETF (AUM: Rs 1,023 crore)
9. DSP Gold ETF (AUM: Rs 722 crore)
10. Mirae Asset Gold ETF (AUM: Rs 521 crore)
(Data source: Value Research)
Gold Mutual Funds vs Gold ETFs – What is the difference?
Gold mutual funds are managed by mutual fund companies and they invest in gold ETFs. You can start investing in a gold mutual fund with a small amount through SIP, also.
Gold ETFs trade on stock exchanges and their prices depend on the current gold price. To buy a gold ETF, you must have a demat account.
Gold ETFs have low cost as their expense ratio is lower than gold mutual funds, which allows investors the possibility of getting higher returns.
Also read: Which is the best day of the month to invest in mutual fund SIP?
Benefits and risks of investing in gold ETFs:
Benefits
Easy trading: It can be easily bought and sold on the stock exchange.
Low cost: There is no making charge and storage cost in it as compared to gold jewellery or physical gold (there is an expense of storing gold by the mutual fund; but given the size it’s likely to be more efficient).
Portfolio diversification: Gold is a safe asset and is seen as a hedge in times of market decline.
Risks and disadvantages
Market volatility: The value of gold ETFs may also decrease when gold prices fall.
No dividend: Unlike other investment options, gold ETFs do not give any dividend or interest, it completely depends on the prices of gold.
Costs: Not all funds have the same expense ratios. So if you do not choose carefully, you could end up paying a lot more as annual expenses for the same amount of holding
Who should invest in gold ETFs?
First, those who want to invest in gold but want to avoid the hassle of physical gold investment.
Second, those who have a demat account and know how to trade through the stock market.
Third, investors who look for diversification in their portfolio.
Fourth, those who want to take advantage of the rising prices of gold in the long term but do not want to invest in jewellery or coins.
Conclusion
Gold ETF is a good option for those investors who want to invest in gold but have concerns regarding the problems associated with physical gold (storage, theft, and adulteration). So, gold ETFs can be a smart and convenient way through which one can invest in pure gold. However, before investing in a gold ETF, do your homework. Both in terms of selecting a safe, cost-efficient fund, and then, investing in line with your recommended asset allocation to gold.