Introduction about Gold

From the early stage of mankind, Gold is determined as the precious metal and it is still the precious metal. In ancient times, Gold has been used as a currency and as a value indicator. In the wide range of the world Gold is a sign of Wealth.

Gold itself has an image of rarity, royalty, and beauty. The system of investment has been changed throughout the years but not the mindset. In ancient times also people used to invest in gold as for doing the barter transaction

Investment in Gold in early stage

In the early stage of mankind, humans used to buy physical gold as it is the most precious and prized metal. From the stage of kings, the major war was started to acquire more gold from others, because gold has a value and treated as a medium of exchange before the invention of money.

At that early stage, there is no investment in stocks, bonds and ETF’s. So, mankind believes in that era to buy more and more physical gold.

Back then in that stage, it was a belief, the person who has more value of

Gold with him is termed as the richest person.

Investment in Gold in a recent stage

In today’s generation, the millennials believe to invest in gold rather than buying it in a physical form. They choose to invest in GOLD FUNDS AND GOLD ETF’S rather than holding the gold chains, rings or bars which is costly than investment and these differences occur due to the making charges, storage cost, margin, interior, etc.

What is Gold ETF’s?

Gold ETF means buying and selling of gold on exchanges as being an exchange-traded fund which saves you from handling the physical form of gold. ETF’s cost is less because its price remains closer to the actual price of gold.

What are Gold Funds?

Gold funds are open-ended mutual funds that invest in Gold ETF’s. It is preferable to invest in gold funds than holding the commodity. It works the same as a mutual fund, the fund manager will actively manage the fund in order to beat the objective. Maybe it is closely related with the Gold ETF in terms of returns.

The price of gold can actually oscillate the performance of the portfolio more than an ETF Gold price. So the price is sensitive with context to the portfolio performance.

Difference between Gold Fund and Gold ETF’s

  1. Pricing – Gold funds are traded on Net Asset Value and Gold ETF’s are traded on the stock exchange, so the units are priced differently in ETF’s and funds.
  2. Investment Mode – For ETF you need to trade with the help of Demat account while in the Funds, you not need a Demat account for trades.
  3. Transaction Cost – There is no Transaction cost in ETF’s for the trades but there are exit load charges for redeeming units in the funds.
  4. Systematic Investment Plan – While investing in Gold Funds you can invest in SIP also but it is not possible under Gold ETF’s.
  5. Expense Ratio – Gold Funds has more expense ratio with comparison to Gold ETF’s because there are exit load charges in the funds.
  6. Liquidity – Gold ETF’s are more liquid than Gold Funds because stock exchange provides more transparency and liquidity.

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Author

Prashant Raut is a successful professional stock market trader. He is an expert in understanding and analyzing technical charts. With his 8 years of experience and expertise, he delivers webinars on stock market concepts. He also bags the ‘Golden Book of World Record’ for having the highest number of people attending his webinar on share trading.