Go traditional when you buy gold this Akshaya Tritiya

Go traditional when you buy gold this Akshaya Tritiya

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Love for GoldIndians love their gold and, traditionally, most people consider it auspicious to purchase gold or silver on Akshaya Tritiya or Dhanteras. India is among the largest consumers of the yellow metal. In 2016 the total stock of gold was at 23,000 tonnes and annual consumption stood at 800-900 tonnes.

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Physical Gold vs Gold ETFsIf you buy gold in the physical form, you may or may not be guaranteed of the minimum 99.5% purity.Gold ETFs, on the other hand, are open-ended mutual fund schemes and can be traded where your money will be invested in standard gold bullion with 99.5% purity. Once you invest in ETFs, its value will depend on the price of physical gold in the market.

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Charges on goldWhen you buy gold jewellery, you shell out 20-30% of the total buying value as making chargesIf you buy a gold ETF, you have to pay an expense ratio of only 1% every year and brokerage charges of ~0.5% or less of the purchase price with every transaction.

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Investment betIf you had invested in physical gold biscuits of 10 gms every year, for the last 10 years, you could have earned Rs 3,22,542 with an investment of Rs 2,47,193.

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ETFs and plunging returnsGold ETFS gave significant annual returns of 25-30% between 2008 and 2011. In 2012, returns declined to about 10 per cent, while in the following year it was in the negative zone at -14 per cent. The returns in 2014 was just about 1%, while 2015 saw gold ETFs plunge into the negative zone. However, in 2016, Gold ETFs delivered around 15 per cent return.

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Gold vs SensexTraditionally, gold has been considered a safe haven for investors. But historically, equity has been the superior asset class over the long-term, outperforming gold by a significant margin. That said, equity and gold have an inverse relationship, that is, when equity goes up, gold comes down, and vice-versa. Therefore, this gives investors enough opportunity to gain from either asset class, especially when the other is making a loss. Likewise, Gold ETFs will also follow the same pattern, compared to the stock market.