Difference between Gold ETF Fund and Gold Savings Fund?

 Gold ETF

Gold ETF lets you own gold in your demat account. Each unit of the ETF lets the investor own 1gm of gold without physically owning it.

Gold ETFs are held in demat (electronic form) whose units are listed on stock exchanges and can be traded on a stock exchange just like buying and selling stocks.
  

Gold ETFs are exchange traded funds that are meant to track closely the price of physical gold. 

Investing in a gold ETF provides the benefit of liquidity and marketability which are a limitation of owning physical gold. 

Gold ETF is liquid because you can trade in it at any time during market hours. 

Gold ETF is marketable because you can trade any amount in it just like a normal stock including short selling and buying on margin. 

Owning gold ETF also is cheaper than owning physical gold because it has no cost of carry (the cost of storing physical gold).

Gold Savings Fund (FoF) 

Gold Savings funds are Gold Fund of funds

Gold savings Fund are open ended schemes which invest in Gold ETF fund of same AMC.

The scheme is suitable for investors who seek exposure to physical gold as an investment and an asset class to diversify their portfolio. It is also suitable to those who find the investments in Gold ETF's to be cumbersome for want of trading and demat account for investing on the exchanges.

It is also suitable to small investors who cannot invest in lot of creation unit size of a Gold ETF or those habituated to dealing with mutual funds directly.

 

How Gold ETF is Different from Gold Savings Fund

1. Demat Account

Having demat is must if you want to invest in gold ETF funds, where as for Gold Fund of fund demat is not must, you can invest without having demat account.

2. SIP option

 In  Gold ETF fund some service providers(broking houses) give the facility of SIP in Gold ETF Fund, Like example SIP in gold ETF is available in ICICI direct if you want to start sip in Gold ETF you can go ahead and use this sip option.

But the point here to note that it depend on number of units alloted  and not on amount of SIP decided.

Like example: you decided sip of Rs.3000 in gold etf fund and on SIP date NAV of gold ETF was Rs. 2100 so only one unit will be alloted to you and (NAV+brokerage charge) will get deducted and not Rs. 3000

 Example (charges we pay in Gold ETF fund)

Where as in Gold Savings Fund
Fixed amount sip option is available.

If you planned Rs. 1000 in Gold Savings Fund, so on SIP date Rs.1000 will get deducted and units will be alloted accordingly.

Statement showing units alloted on sip date 

 3. Charges:

 When we invest in Gold ETF fund the broker charge  1% on Nav + Stamp duty and other charges, where as when we invest in gold Savings fund no charges deducted on entry (no entry load)

For Gold ETF we maintain demat account, we pay Rs. 500 as annual charges, if one is opening demat account 0nly for Gold ETF then should also consider the annual maintenance charges for DP account.

Where as when we invest in Gold Savings fund entry load is nil, exit load is charged if applicable for particular scheme if withdrawn before that period.

Then which is considered best in terms of less charges:

Gold savings fund is fund of fund, as said that charges will be more compare to gold ETF fund as we pay ( ETF charges + Fund Recurring charges),

 Example:
 If GOLD ETF charges are 1%, and if  we invest in gold savings fund the charges  will be ETF charges +fund charges, if fund charges are 0.50% so Gold savings fund charges will be (1.5%)


In Gold ETF:  We pay Annual  Maintenance for Demat account, Brokerage charges, Transaction and  Delivery charges.

In  Gold Savings we mainly pay Recurring charges.

So considering all charges , i feel both are at par, i don't find Gold ETF cheaper as when i did the calculation i actually paid more than 1.5% when investing in Gold  ETF, plus no fixed amount we can consider in gold ETF.


How 
If demat account is opened only for investing in gold ETF and i pay annual demat charges of Rs. 500 so monthly SIP charges will be Rs. 41.66 on Gold ETF fund
Plus 1 % on NAV on Purchase, after doing all calculation work i don't think Gold ETF is cheaper compare to Gold Savings Fund.



 

Summary:  This is the cost of convenience that one will pay when investing in gold savings fund fund instead of paying annual maintenance charges for a demat account , delivery brokerages charges, transaction charges incurred for investing through the dematerialized mode.