Gold ETFs invest in 99.5% purity gold bullion that is as good as investing in the physical metal. If you are looking to accumulate gold for the long-term, investing in Gold ETFs is a wiser option than holding it in physical form or investing in a gold fund.
Gold Mutual Funds invest in stocks of companies involved in mining, processing, fabrication and distribution of gold. The performance of gold funds is dependent on the movement of stock prices of these companies. While Gold ETFs offer returns directly linked to the performance of the metal, Gold Funds offer returns linked to the performance of the gold industry.
Gold Mutual Funds, managed by fund managers being actively managed, have the potential to offer higher return as compared to Gold ETFs that mimic a market index. Since ETFs replicate an index, Gold ETFs have lower expense ratio than Gold Fund. Gold ETFs track the price movement of the physical metal more precisely than Gold Mutual Funds. Since ETFs are listed on an exchange, they offer high liquidity. You can buy or sell your holdings at any time during the day at the real-time price of gold. Thus, Gold ETFs are a good alternative to owning physical gold,. Gold Funds offer a good opportunity to invest in the gold industry for the long-term through SIP.