DSP Mutual Fund launches Gold ETF: All you need to know

Amid the festive season, DSP Mutual Fund has launched a Gold exchange traded fund (ETF),  an open-ended scheme, offering investors a convenient way to invest in gold like a normal mutual fund scheme, compared to the physical version.

A Gold ETF is an exchange-traded fund (ETF) that aims to track the domestic physical gold price. They are passive investment instruments that are based on gold prices and invest in gold bullion.

The NFO opens for subscription on November 3, 2023, and closes on November 10 2023. 

Gold has been in focus as a haven asset amid the ongoing geopolitical tension. Add to that the fact that global liquidity has been drying up, while there has been increased demand from Central banks’, combined with the supply of the metal remaining stagnant. 

Investments in gold have typically done well at a time when there is a weakness in the dollar. 

"Gold also has a historical negative or low correlation with equity, which also makes it a good option to diversify away from equity. DSP Gold ETF Fund of Fund offers the advantage of owning Gold in a convenient digital form without the requirement for a demat account to transact. It also presents a systematic way to invest in Gold via SIPs along with the flexibility of redeeming the units without any lock-in period," the company said in a statement. 

“Gold is a great addition to a typical equity – debt heavy portfolio due to the low correlation to these asset classes. The scheme structure presents a convenient way to diversify your portfolio and accumulate gold in a systematic manner, automatically adding depth and multi-dimensionality to your investments,” says Anil Ghelani, CFA, Head – Passive Investments & Products, DSP Mutual Fund. 

. Hence, having gold in one’s portfolio helps investors diversify their portfolios, which helps it fall lesser during times of a downturn. However, one should bear in mind that being a cyclical asset class, entering at the wrong time can impact returns in the short term. Financial experts say gold should not cross more than 10 per cent of one's portfolio. 

Gold ETFs are listed and traded on the National Stock Exchange of India (NSE) and Bombay Stock Exchange Ltd. (BSE) like a stock of any company. Gold ETFs trade on the cash segment of BSE & NSE, like any other company stock, and can be bought and sold continuously at market prices.

Buying Gold ETFs means you are purchasing gold in an electronic form. You can buy and sell gold ETFs just as you would trade in stocks. When you actually redeem Gold ETF, you don’t get physical gold, but receive the cash equivalent. Trading of gold ETFs takes place through a dematerialised account (Demat) and a broker, which makes it an extremely convenient way of electronically investing in gold.

Gold ETFs are ideal for investors who wish to invest in gold but do not want to invest in physical gold due to the storage hassles / doubt about purity of gold and are also looking to get tax benefits. There is no premium or making charge, so investors stand to save money if their investment is substantial. What’s more, one can purchase as low as one unit (which is 1 gram).