Gold ETF vs Gold Fund
The way gold prices have been increasing over the last few years, increasing the profits for those who choose it as a mode of investment, has made many people wake up and take notice. For people who want to invest, it is better to take route of either gold ETF or gold fund instead of purchasing jewelry. However, there are many who cannot spot the differences between gold ETF and gold fund and which one is better mode of investment for them. This article aims to clarify these differences that are mainly confined to mode of purchase than any other thing.
Most mutual funds are today making investments in gold and offering a gold fund to the investors. However, investors do not understand differences between various mutual fund schemes and take a decision that often costs them dearly.
What is Gold Fund?
Gold mutual funds are an attractive option of investment these days. These schemes are equity oriented and do not directly invest in gold but in stocks of companies dealing with gold. When you invest in this mutual gold fund, you are indirectly investing in gold as your investment buys stocks of companies doing business in gold and are listed in the stock exchange. Remember, companies doing gold business can be anywhere in the world and not necessarily in one’s own country. Movement of gold prices has an effect on stock prices of companies involved in gold mining, and it is this linkage that earns profits for those choosing this index. There is no direct relationship with the gold prices in these gold funds, so one must not expect a profit in proportion to rise in gold prices.
What is Gold ETF?
Gold ETF is a relatively new player as a mode of investment in gold. ETF refers to exchange traded funds. Such a fund has the advantage of having features of both a gold fund as well as stocks listed in a stock market. As an investor, one is free to buy or sell gold ETF in the market as he would stock of any other company. One feature of gold ETF that makes it very attractive among investors who think of gold as an investment option is a direct linkage of the fund with live gold prices, and this makes it exciting and easier to buy or sell. However, this feature is common to all gold ETF’s making all of them rise and fall with gold prices. Buying in gold ETF is easier as one should buy when gold prices are temporarily down.
What is the difference between Gold ETF and Gold Fund?
• No brains are required before buying gold ETF while one has to make analysis of different gold funds before finalizing
• Gold ETF fund is available like other stock listed in the stock market and one can buy as per his convenience any time
• Gold ETF fund is directly linked with gold prices, and they are live while this is not the case with gold fund
• Gold fund makes investment in companies doing business in gold such as gold mining whereas gold ETF is dependent upon live gold prices.