Buy ETFs with low tracking error and expense ratio

A large number of people will purchase gold on Dhanteras.

- HIMALI PATEL

While it is alright to buy a token amount of physical gold on this day, the bulk of one’s exposure to gold for investment purposes should be through gold exchange-traded funds (ETFs) or fund-of-funds (FoFs).

Low-cost and convenient

Gold ETFs offer a simple, transparent, low-cost, convenient, and liquid way to invest in gold. “They closely track gold prices, can be traded like stocks, and allow for small investment amounts, making them accessible to all investors,” says Alekh Yadav, head of investment products, Sanctum Wealth.

Gold ETFs are useful for diversifying the portfolio. “For investors seeking safety during economic or geopolitical stress, they serve as an efficient stabiliser in a diversified portfolio. ‘They also offer protection against inflation and currency weakness,” says Chintan Haria, principal - investment strategy, ICICI Prudential Asset Management Company (AMC).

Sandeep Parwal, founder, SPA Capital, says that they provide safety through digital storage.

Gold ETF versus jewellery

Gold has two purposes: it serves as a store of value and is used as jewellery. Experts recommend using gold ETFs for investment and buying jewellery for personal use.