Investing in gold has long been considered a safe haven for investors, particularly in times of economic uncertainty. While physical gold remains popular, modern investors are increasingly turning towards more convenient options like Gold Exchange Traded Funds (ETFs). Gold ETFs offer a blend of the stability of gold and the liquidity of stock market instruments. Zerodha, one of India’s leading stockbrokers, provides a user-friendly platform to invest in Gold ETFs. In this detailed guide, we will walk you through the process of purchasing Gold ETFs on Zerodha, along with insights on why they could be a good addition to your portfolio.
What Are Gold ETFs?
Before we delve into how to buy Gold ETFs on Zerodha, it’s important to understand what they are. Gold ETFs are mutual fund units that represent physical gold. Essentially, they combine the benefits of investing in gold and the convenience of trading stocks on an exchange. Each Gold ETF unit typically represents one gram or half a gram of physical gold, and they are backed by actual gold held in secure vaults.
The price of Gold ETFs fluctuates based on the price of gold in the market. These ETFs can be bought and sold just like shares on the stock exchange, offering liquidity and ease of trading. Additionally, Gold ETFs eliminate the hassle of storing physical gold, making them an attractive option for investors looking to diversify their portfolios with precious metals.
Why Invest in Gold ETFs?
1. Liquidity and Convenience
Unlike physical gold, which requires storage and security, Gold ETFs can be easily bought and sold on the stock exchange. This offers investors the ability to quickly enter and exit their positions based on market conditions. You can trade Gold ETFs in small quantities, making them accessible to retail investors as well.
2. Cost Efficiency
Investing in physical gold often involves making charges and additional taxes. In contrast, Gold ETFs carry lower transaction costs, and because they are traded on the stock exchange, there are no making or wastage charges involved.
3. Purity and Transparency
Gold ETFs are backed by physical gold of 99.5% purity, stored securely by the fund houses. This eliminates concerns about the quality of the gold you’re investing in. The prices of Gold ETFs are linked to the market price of gold, ensuring transparency and reflecting real-time gold rates.
4. Tax Benefits
Gold ETFs are more tax-efficient than holding physical gold. Long-term capital gains (LTCG) tax is applicable if you hold Gold ETFs for more than three years, and it comes with indexation benefits, which reduce your overall tax liability.
Steps to Purchase Gold ETFs on Zerodha
Now that you understand the benefits of Gold ETFs, let’s look at the steps involved in purchasing them through Zerodha, one of India’s most trusted brokerage platforms.
Step 1: Open a Zerodha Demat and Trading Account
If you don’t already have a Zerodha account, the first step is to open one. Zerodha provides a seamless online process for account creation. Here’s how you can do it:
- Visit Zerodha’s website and click on the ‘Sign Up’ button.
- You’ll need to provide your PAN Card, Aadhaar Card, and bank account details.
- Complete the KYC (Know Your Customer) process by uploading the necessary documents.
- Zerodha allows for instant account opening if you use your Aadhaar card for e-sign. Alternatively, you can choose the offline process, which may take a few days.
Once your trading and Demat account is set up, you’re ready to start investing in Gold ETFs.
Step 2: Log into Zerodha Kite
Zerodha’s Kite is the flagship trading platform, offering a clean and user-friendly interface for trading. You can access Kite through its web portal or mobile app.
- Log in to Kite using your Zerodha credentials (User ID and password).
- Once logged in, you’ll see your dashboard, where you can view your portfolio, funds, and various stock categories.
Step 3: Add Funds to Your Account
Before purchasing Gold ETFs, you need to ensure that you have sufficient funds in your trading account. Follow these steps to add funds:
- Navigate to the ‘Funds’ section on the Kite dashboard.
- Select ‘Add Funds’ and input the amount you wish to transfer.
- Zerodha supports UPI, net banking, and payment gateway options for adding funds.
The transferred amount will reflect in your trading account instantly.
Step 4: Search for Gold ETFs
To find Gold ETFs, use the search bar located at the top of the Kite platform.
Type ‘Gold ETF’ in the search bar, and a list of Gold ETFs available on the market will appear. Some popular Gold ETFs include:
- Nippon India ETF Gold BeES
- HDFC Gold ETF
- SBI Gold ETF
- ICICI Prudential Gold ETF
You can click on any of these ETFs to view their price charts, historical performance, and other key data.
Step 5: Place a Buy Order
After selecting the Gold ETF you want to invest in, you’ll need to place a buy order.
Click on the Gold ETF you wish to purchase.
You’ll see two options: Buy and Sell. Click on the ‘Buy’ button.
A buy order window will pop up. Here, you can enter the quantity (number of units) of Gold ETFs you want to purchase.
Set the Order Type:
- Market Order: Executes the purchase at the current market price.
- Limit Order: You can specify the price at which you want to buy. The order will only execute if the price reaches your limit.
Click on Buy to confirm the transaction.
Step 6: Track Your Investment
Once your order is executed, you can track your investment in the ‘Holdings’ section of the Kite platform. Here, you’ll be able to view the number of Gold ETF units you hold, their current market value, and any changes in value since your purchase.
Step 7: Selling Your Gold ETFs
Selling your Gold ETFs is just as easy as buying them. Follow the same steps to search for the ETF you hold, but instead of clicking ‘Buy’, click on ‘Sell’.
- You can place a Market Order to sell the ETF at the current market price or set a Limit Order to sell it at a higher price.
- Once you sell the units, the funds from the sale will be credited to your Zerodha trading account.
Things to Keep in Mind Before Investing in Gold ETFs
1. Expense Ratio
Gold ETFs come with an expense ratio, which is the fee charged by the fund house for managing the ETF. It’s important to compare the expense ratios of different Gold ETFs before investing, as lower expense ratios can significantly improve your overall returns.
2. Price Volatility
Gold prices can fluctuate based on various factors such as inflation, currency fluctuations, and geopolitical events. While gold is traditionally seen as a safe investment, it’s important to be aware of these factors and invest with a long-term perspective.
3. Market Timing
Although Gold ETFs provide liquidity and can be traded throughout the day, it’s essential to avoid trying to time the market. Long-term investment in gold generally yields better results, especially when viewed as a hedge against inflation or economic downturns.
4. Liquidity and Exit Loads
Most Gold ETFs are highly liquid, allowing for easy entry and exit. However, some may have exit loads if sold within a short period. Ensure that you check these details before investing.
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Conclusion
Purchasing Gold ETFs on Zerodha is a straightforward and efficient way to gain exposure to gold without the challenges of buying physical gold. By following the steps outlined in this guide, you can seamlessly buy and sell Gold ETFs on Zerodha’s Kite platform. As with any investment, it’s crucial to conduct thorough research and consider your financial goals and risk tolerance before investing in Gold ETFs.
In today’s ever-changing economic environment, diversifying your portfolio with gold can provide much-needed stability. Gold ETFs offer an excellent vehicle for doing so, combining the benefits of gold investment with the convenience of stock market trading. Through Zerodha’s easy-to-use platform, you can make gold an integral part of your investment strategy.
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