Topic 5 of 6~5 min read

Gold ETF SIP

Definition

Gold ETF SIP involves systematic investment in Gold Exchange Traded Funds, which track the domestic price of gold. Each unit of a Gold ETF represents approximately 1 gram of gold. It provides exposure to gold without the hassles of physical gold storage, purity concerns, and making charges.

In Simple Words

Gold has been a traditional Indian investment. Gold ETF SIP modernizes this by allowing you to buy gold digitally in small amounts. No storage worries, no purity issues, no making charges. Gold acts as a portfolio hedge during economic uncertainty and inflation. A 5-10% gold allocation improves portfolio risk-adjusted returns.

Real-Life Scenario

Meena allocates ₹2,000/month SIP in Gold ETF: Over 10 years, gold has returned ~11% CAGR in India Her ₹2.4L investment could grow to ~₹4.44L During market crashes (2008, 2020), when her equity dropped 30-40%, her gold held steady or even appreciated, reducing overall portfolio pain.

Key Points to Remember

Gold ETF SIP = digital gold investing through mutual funds

Each unit ≈ 1 gram of gold at domestic price

No storage, no purity concerns, no making charges

Historical return: 8-11% CAGR in INR terms (last 15 years)

Acts as portfolio hedge and inflation protection

Recommended allocation: 5-10% of total portfolio

Tax: Treated as debt fund (all gains at slab rate)

Alternative: Sovereign Gold Bonds for better tax treatment

Frequently Asked Questions

Test Your Knowledge

1 questions to check your understanding

Question 1 of 1Score: 0/0

What is the recommended gold allocation in a diversified portfolio?

Summary Notes

Gold ETF SIP is the cleanest way to invest in gold

5-10% allocation provides portfolio hedging benefit

Gold shines during uncertainty — complements equity well

Consider SGBs for long-term gold holding (better tax + interest)