Gold/Silver ETFs Compare

Additional Useful Information

• An investor can buy “Units” of these ETFs. These units can be purchased at a price which is called the “Net Asset Value or NAV”. The NAV of these funds keeps changing daily depending upon the changes in the stock prices of the companies that are held by them.

• The investors can sell these units anytime at the NAV price prevailing on the day of the sale –

• Total Purchase Amount	=	Number of Units X NAV as on the day of purchase
  Total Sale Amount	=	Number of Units X NAV as on the day of sale
  Total Gain	=	Total Sale Amount – Total Purchase Amount

• The purity of gold and silver is guaranteed. This is an advantage over holding physical gold/silver since when investors hold physical gold/silver, the purity may not be entirely accurate.

• Unlike Mutual Funds, ETFs do not attract any exit load since investors sell their ETF units to other investors in the market.

Returns *

• Gold/Silver ETFs do not guarantee returns. Whatever return is achieved by the domestic price of gold/silver, will be the return given by the gold/silver ETF.

• When held over a 5-year period, these funds can generate returns ranging from 16% to 17% per year.  

Risk Level

• Gold/Silver ETFs are medium risk investments.

• Gold/Silver prices are heavily dependent on the state of the economy. In an inflationary environment, gold/silver prices rise while during a period of low inflation, gold/silver prices are stable or decrease. It is important to analyze the state of the economy before deciding on purchasing gold/silver ETFs.

Liquidity

• When an investor sells or redeems units of ETFs, the sale amount will be received by the investor in 2 working days (T+2).

• Gold ETFs are typically liquid.

Interesting Facts

• Gold/Silver ETFs are passive investments. They do not try to outperform market returns. They simply track the domestic price of gold.

• ETFs do not have any manager-based risk, like in mutual funds. Since they track an index, ETF managers do not have to take risks that help them outperform the market.

• Gold/Silver ETFs are not subject to the risk of theft since they are stored in digital form.

• Holding physical gold/silver may involve storage costs (such as purchasing a safe). However, all these storage costs are eliminated by purchasing gold/silver ETFs.

• ETFs have lower transaction costs as compared to mutual funds. In other words, they are more cost efficient as compared to mutual funds.

Tax Implications

• Earnings received from Gold/Silver ETFs are taxable.

• When investors sell Gold/silver ETFs prior to maturity, the difference between the sale amount and purchase amount is typically called as “Capital Gain” or “Capital loss” (if sale amount is lesser than the purchase amount).

• The tax that the investor must pay on Capital Gain is –
• Situation 1 – If the ETFs are sold within a period of 2 years from investment, the Capital Gains earned (called Short Term Capital Gains) are taxed at 20% of the gains.
• Situation 2 - If the ETFs are sold after a period of 2 years from investment, the Capital Gains earned (called Long Term Capital Gains) are taxed at 12.5% of the gains.

• There is no tax in case of “Capital Loss”.

• Any dividends/Interest/Payouts that investors receive from gold/silver ETFs is added to their taxable income and they need to pay tax according to their tax slab.

Where To Invest

• https://www.5paisa.com/etf/gold-etf

• https://www.etmoney.com/mutual-funds/featured/best-gold-mutual-funds/25