Amid the festive season, DSP Mutual Fund has introduced a Gold Exchange-Traded Fund (ETF), an open-ended investment scheme offering investors a convenient and digital way to own a piece of the precious metal. This Gold ETF provides an alternative to physical gold, making it a versatile addition to your investment portfolio.
Investing in Gold ETF
A Gold ETF, or Gold Exchange-Traded Fund, is an investment vehicle designed to mirror the domestic physical gold price. It functions as a passive investment instrument, tracking gold prices and investing in gold bullion.
DSP Mutual Fund’s Gold ETF has opened for subscription on November 3, 2023, and will remain available for investors until November 10, 2023.
Gold’s Appeal in Uncertain Times
Gold has been a preferred haven asset, particularly in times of geopolitical tension and economic uncertainty. With global liquidity shrinking and increased demand from central banks, coupled with a stagnant supply of the precious metal, gold continues to shine as a safe investment.
Diversification and Low Correlation
Investing in gold can also serve as a diversification strategy. Gold historically exhibits a negative or low correlation with equities, making it an excellent option for diversifying your investment portfolio. DSP Gold ETF Fund of Fund offers the convenience of owning gold in digital form, eliminating the need for a demat account. This enables systematic investment in gold through SIPs, with the flexibility to redeem units without any lock-in period.
Anil Ghelani, CFA, Head of Passive Investments & Products at DSP Mutual Fund, emphasizes the value of adding gold to a portfolio. “Gold is a great addition to a typical equity-debt heavy portfolio due to the low correlation to these asset classes,” he notes. This diversification helps protect your investments during market downturns.
However, it’s essential to remember that gold is a cyclical asset class, and timing is crucial. Financial experts recommend that gold should not exceed 10% of your portfolio.
The Convenience of Gold ETFs
Gold ETFs are listed and traded on major stock exchanges like the National Stock Exchange of India (NSE) and Bombay Stock Exchange Ltd. (BSE). These ETFs function like stocks of any company, trading on the cash segment of these exchanges.
Purchasing Gold ETFs means you’re acquiring gold in electronic form. You can buy and sell them just like you would trade stocks. When you decide to redeem your Gold ETF holdings, you’ll receive the cash equivalent, not physical gold. Trading Gold ETFs requires a dematerialized account (Demat) and a broker, making it a highly convenient and electronic way to invest in gold.
These ETFs are especially suitable for investors looking to invest in gold without the hassles of physical storage or concerns about gold purity. Gold ETFs offer several advantages, including no premiums or making charges, making them cost-effective for substantial investments. Additionally, investors can start with purchasing as little as one unit, which is equivalent to 1 gram of gold.
