Gold or gold ETF: Which will bring you higher returns?
As gold prices fluctuate, many investors turn to the precious metal as a safe haven. However, the way they invest in gold has evolved over time. While physical gold was once the primary choice, today there are a variety of ways to gain exposure to the metal. Investors now have five main options to consider when looking to invest in gold.
Sovereign Gold Bonds (SGBs) – Government-backed gold investments with interest payouts.
Gold ETFs – Exchange-traded funds that track gold prices.
Gold Funds – Mutual funds investing in gold ETFs.
Digital Gold – Online purchases backed by real gold.
Physical Gold – Traditional gold bars, coins, or jewellery.
Gold or Gold ETFs – which one makes more sense?
It all comes down to what matters more: returns, convenience, or liquidity. Experts point out that while both physical gold and Gold ETFs offer similar long-term returns, the costs and practicality differ.
Physical gold comes with added costs such as making charges (especially for jewellery) and storage concerns. However, over the past five years, it has outperformed Gold ETFs, delivering a 20% compound annual growth rate (CAGR), compared to 13.8% to 14.07% for top ETFs.
Over a 10-year period, physical gold gave a 12% CAGR, while ETFs provided returns ranging from 10.02% to 10.28%. The difference narrows over 15 years, with physical gold yielding 11% CAGR, while ETFs returned 9.54% to 9.62%.
Convenience vs higher returns
Although physical gold has historically delivered slightly better returns, Gold ETFs come with added convenience. They offer liquidity, transparency, and lower transaction costs. Unlike physical gold, ETFs don't require storage, nor do investors need to worry about purity.
Today's rate
Gold prices in Kerala remain strong, reflecting the broader global trend. As of today, the price stands at ₹64,480 per 10 grams, while one-gram costs ₹8060.
So, which one is better? Those prioritising ease of buying and selling may find ETFs more attractive, while traditionalists who value tangible assets might still favour physical gold.
(By arrangement with livemint.com)
