Gold investment: Groww Mutual Fund floats new gold ETF scheme with surging yellow metal prices
Mon Oct 07 2024
Gold investment: Groww Mutual Fund has introduced the Groww Gold ETF, offering investors a convenient and simplified way to access the gold market. The New Fund Offer (NFO) will be open for subscription from October 7 to October 18, 2024.
A Gold Exchange-Traded Fund (ETF) is a type of investment fund traded on stock exchanges that seeks to mirror the price movement of physical gold within the domestic market. Gold ETFs are considered passive investment vehicles that closely follow the fluctuations in gold prices and primarily invest in gold bullion. Essentially, Gold ETF units are representations of physical gold that can exist in either paper or dematerialised forms.
The Groww Gold ETF aims to mirror the local price of physical gold, providing investors with the opportunity to invest in gold bullion with a purity of 99.5%. This cost-effective investment tool eliminates the need to physically purchase, store, or insure gold, while still enabling investors to capitalize on price fluctuations. The Groww Gold ETF will allow investors to easily buy and sell units on the stock exchange, offering liquidity and transparency.
The introduction of the Groww Gold ETF couldn't have been better timed, as gold prices in India have experienced a 9% decrease due to reduced customs duties earlier this year. This creates a favorable opportunity for investors to purchase gold at more affordable rates.
Why to consider Groww Gold ETFs
Gold surging prices: Gold ETFs have become increasingly popular in India, with substantial investments flowing in recently. In July 2024, Rs 1,337.4 crore was invested in gold ETFs, marking the highest monthly inflow since 2020.
The Groww Gold ETF will enable investors to conveniently trade units on the stock exchange, providing liquidity and transparency.
With a small investment of Rs 500, the ETF grants access to gold for a diverse group of investors. Furthermore, units can be utilized as loan collateral, and the ETF may offer tax benefits for those holding long-term investments.
This secure and regulated investment opportunity in gold, overseen by SEBI, is designed to appeal to both new and experienced investors.
Correlated Returns with Gold Performance: The ETF aims to closely track the price movements of gold, providing investors with the opportunity to benefit from the metal's performance, subject to minimal tracking errors.
Regulated and Transparent Operations: Governed by SEBI, the Groww Gold ETF maintains a high level of regulation to ensure transparency in its operations. Investor funds are held in Demat accounts, offering a secure investment option with quality and traceability.
Gold as a Hedge: Historically, gold has served as a hedge against systemic risks such as financial crises and inflation. For instance, during the 2008 global financial crisis, gold delivered a positive return of 5.8%, contrasting with the negative performance of major stock indices like the S&P 500 and Nifty 50.
Similarly, during the COVID-19 pandemic, gold gave a return of 25.1% in 2020, which we believe has further reinforced its role as a stabilizer during uncertain periods.
Ease of Trading: ETF units can be easily bought and sold on the stock exchange during market hours, offering liquidity and transparency in pricing.
Fractional Investing: Investors have the flexibility to purchase small units of the ETF, with each unit representing 0.01 grams of gold, catering to investors with diverse financial objectives.
Collateral Option: The Groww Gold ETF can serve as collateral for loans, adding another layer of financial utility for investors.
Tax Efficiency Benefits: The 3ETF provides long-term investors with the potential for LTCG (Long-Term Capital Gains) after holding the investment for 12 months, which are taxed at 12.5% without indexation. STCG (Short-Term Capital Gains) are subject to taxation based on the applicable income tax slab. This tax structure makes the ETF potentially more tax-efficient compared to physical gold investments.
Hedge against Currency Depreciation: From 2014 to 2024, gold yielded returns of 106.76% in USD terms, while the INR depreciated from 61.54 to 83.82 against the USD during the same period. This translated to a 181.62% return in INR terms, highlighting gold's value as an asset for hedging against both currency depreciation and inflation.
Source: https://www.businesstoday.in/