Mutual Funds

E-Gold vs Gold ETF – Which is Better and Why?

How E-Gold is different from Gold ETF? Let’s Check out the key differences between them:

Gold has a very important place in every country and society from ancient times, Indians love gold. Love for gold in India is not new it dates back thousands of years, in fact, India was considered to be the golden bird at a certain time. Gold is considered to be very auspicious in India for a religious purpose, it is considered to be a very safe and liquid investment.

Still, Indians are the world’s one the largest retail gold consumers in the world, gold jewelry is the most common in every Indian household. At the same time, gold is known as the most accepted and liquid asset in the world, gold works as a great asset against inflation and provide stable returns to investors.

Indians are also very smart in using modern-day technologies for investment, buying gold via financial instrument or electronic medium is considered to be a very quick and safe way to buy gold.

Gold can be bought in E-Gold and Gold ETF mode, it can make buying gold a lot easier, safer, and pocket friendly. Let’s find out the features and differences between E-Gold and Gold ETF.

Key Differences Between E-Gold and Gold ETF

1. As we already discussed apart from physical buying of gold, there are other options to buy precious yellow metal gold such as e-gold and gold ETF. These options make purchasing gold more safe and systematic. E-gold can be held or traded electronically in a Demat account and can also be converted into physical gold.

E-gold in India is offered by National Spot Exchange Limited (NSEL), NSEL also provides options to trade other commodities such as silver and platinum online. Investors have the option to buy gold in small quantities in NSEL and can sell it after making profits.

Investors also have the option to take physical delivery of gold.

Golf ETF is another option to invest in gold, gold ETF is similar to mutual funds and each unit is equivalent to one gram of gold although some funds enable investors to invest in smaller denominations such as 0.5 grams per unit.

Gold ETF can also be traded from without Demat account, only some gold ETF allows physical conversion of funds into gold and some do not while all e-gold can be converted into physical gold. Conversion of gold ETF is possible once it reaches a certain size, this size can vary from 500 grams to 1 kg depends on the fund house.

2. 1 year is considered to be long term in gold ETF while in e-gold 3 years are counted as long term. E-gold is subjected to wealth tax while gold ETF is treated as mutual funds so it is not subjected to wealth tax. If gold ETF is sold before 1 year after earning gains then it is taxed as per person’s tax slab if it is sold after 1 year than it is subjected to 20 percent tax.

If e-gold is sold before 3 years then it is taxed as per the person’s tax slab if it is sold after 3 years then it can be charged with 20 percent tax.

3. E-gold can be traded in NSEL on weekdays and its timing is from 10:30 am to 11:30 pm whereas gold ETF are traded only till 3:30 pm. Investors can also buy e-gold from firms that are associated with NSEL.

4. In gold ETF trading, an investor tracks the net asset value (NAV) which keeps changing with the price of gold while in e-gold trading an investor can directly track the price of gold.

5. Gold ETF’s net asset value (NAV) are charged with various deductions such as fund management fees, storage charges, and other custodian charges, etc whereas e-gold is not deducted with such charges, and traded at very normal cost so it can be expected e-gold offer slightly better returns as compared to gold ETF.

There are no recurring charges are associated with e-gold so it is one of the reasons e-gold can offer better returns on investment. E-gold can be converted to physical gold once its value reaches the equivalent of 8 grams of gold whereas for gold EFT physical conversion to gold is not possible in every fund so in the physical conversion of gold e-gold is more convenient or reliable.

Person’s who need physical gold for personal utilization purposes should invest in e-gold because it can be converted to physical gold quite easily. If a person wants to invest for the long term than e-gold can be the better option as compare to gold ETF if every aspect is calculated.

Conclusion

Investment in gold is considered to be one of the safest investment in the word because volatility or fluctuations in gold price is less but it still required basic knowledge of gold trading because prices of gold are not always the same, they keep changing up and down with time.

If e-gold is compared with gold ETF for better returns than e-gold has an edge over gold ETF because gold ETF are subjected to various charges while e-gold earning are not deducted with such charges. It can also be converted to physical gold easily.

Both e-gold and gold ETF have their own pros and cons so investment in both depends on the goals and objectives of an investor, it is also recommended for beginners they must get the basic knowledge of gold market investments and risk rewards associated with it before doing any major investment in it.

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