Which one is good Gold ETF or e-Gold ?
Now a days this question
is frequently asked by gold investors. As gold price has seen decline in the
rate since last few months. Earlier people had only one option to purchase gold
in physical form. It is important that before investing your funds in any
instrument first look at pros and cons and compare the cost and return with
similar available instruments. Three is different opinion in the market expert
but majority of them prefer e-Gold due to its cost effective attribute. Let us
find out whether we should go with Gold ETF or e- Gold.
Gold ETF:
Gold ETFs are exchange traded mutual fund schemes that
invest in physical gold. It is also known as paper gold. The prices of Gold ETFs are
measured in terms of the net asset value (NAV). One unit represent 1 gm
rate of gold. There are many charges like management and advisory fees, marketing
and distribution expenses, custodian charges, trading brokerage and other
operational expenses. Apart from these charges there is tracking errors
which also affect the return of the Gold ETFs. For invest in Gold ETF you need
de-mat and trading account with the broker.
It can be converted into
physical delivery but there are different quantity criteria for different AMC.
It is difficult to convert small quantity Gold ETF into physical gold. You can
invest in it during 9:00 AM to 3:30 PM (exchange trading hours of weekdays).
Gold ETFs are taxed as
Non equity mutual fund. If you sold in within one year you have to pay
short term capital gain tax according to your tax slab. If you sold it after one year then you have two
options for paying long term capital gain tax, one is 10 % tax without
indexation and the other one is 20% tax with indexation.
e-Gold:
For invest in e-Gold you need a de-mat a/c with NSEL
(National Spot Exchange Limited). In e-gold, investors are directly holding the
gold units and NSEL do not charge for it to investors. Physical delivery
in e-Gold is possible even in small quantity. The transaction cost is very low
in NSEL compare with Gold ETF. You can trade during 10:00 AM to 11:30 PM on
weekdays. The taxation of e-Gold is same as physical gold. If you held it less
than 3 year you have to pay short term capital gain tax according to your tax
slab. If you hold it more than 3 year then you have to pay 20% long term
capital gain tax.
From above information
one can easily judge that e-Gold has more edge than Gold ETF. The Gold ETF only
score in the term of taxation.
For more detail about any other query related investment,
you can contact me through my email.
Regards,
Arvind Trivedi
Certified Financial Planner
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