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Gold ETF Pros and Cons

The pros of gold ETF funds lie in their ability to use derivatives representing physical gold to reduce or eliminate trading and accounting costs. In fact, ETFs are traded on major stock exchanges and are traded on a regular basis. Gold ETF is a popular choice among gold fund investors who keep track of their day-to-day mutual fund performance because all their buying and selling activities are wrapped up in one transaction.

Let’s discuss the pros and cons of gold ETFs one by one:


  • Efficient & Transparent Investment

The advantage of this structure is that trading and clearing become much more efficient and transparent. One also has the freedom to decide on the index in which the fund will be investing and follow the same index throughout the life of the investment. Also, while dealing with gold ETF funds, investors do not need to monitor the trading activities of the assets personally. All of this gets possible due to the flexibility of gold ETFs.

  • More Easy to Monitor, Less Risky to Operate

Gold ETFs are less risky than other common investment vehicles. This is mainly because the fund manager can secure the rights of ownership through stock options. This way, investors need not worry about managing a portfolio as the fund manager can exercise full control over it. Additionally, the pricing, volume, and mutual fund performance can be easily monitored, allowing investors to make informed decisions.

  • Attractive Schemes with No Redemption Liability

Another advantage of the gold ETF is that they enjoy significant tax benefits. Because ETFs trade on major exchanges, the exchange-traded fund usually enjoys substantial tax benefits. Also, since the transactions are fully executed through the exchange-traded fund and not through the personal accounts of the investors, there is no redemption liability. Finally, ETFs offer attractive administrative schemes that meet individual needs. For instance, some of them offer a lock-in period. During the lock-in period, the investor is secured against an interest rate for a fixed period described by the SIP calculator.


  • Understanding Such an Investment Option Takes Time

Investing in gold will be a successful move if you know how to predict gold prices and interpret them correctly. As compared to gold prices predictions, gold prices may fluctuate greatly from time to time. So instead of getting profits from every upsurge in gold prices, you have to invest in many small amounts over long periods. Moreover, it is important to consider that even the best gold price prediction may not be right most of the time.

  • Sometimes the Gold Market Goes Highly Volatile

Besides that, you may not get maximum profit from every upsurge in gold prices. It is also important to remember that gold prices may go up and down for various reasons. Some reasons may be a recession, political instability, change in oil prices, etc. Therefore, if you plan to use Gold ETF, you have to be careful with gold prices predictions. If you can manage to identify the right and useful trends in gold prices, you may be able to use them to increase your profits.


After analyzing all the scenarios, it can be said that gold ETF’s pros overpower the cons, and the cons can be won with time, experience, and certain guidance. That’s why a good option is to use an online broker. Investors interested in diversifying their investments but cannot afford to burn down a hole in their pockets make sense to purchase gold ETFs. They are secure and viable investment options for investors with long-term investment plans.

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