The Aditya Birla Sun Life Gold ETF is an open-ended exchange-traded fund designed to track the performance of gold prices. It primarily invests in physical gold of 99.5% purity, aiming to provide returns that closely correspond to the price movements of gold.
Key Features:
- Investment Objective: To generate returns in line with the performance of gold, subject to tracking errors.
- Asset Allocation: A minimum of 95% of net assets are allocated to physical gold, with the remaining portion invested in debt and money market instruments to meet liquidity requirements.
- Liquidity: Units are listed and traded on stock exchanges, providing investors with a liquid and cost-effective means of investing in gold.
- Expense Ratio: The fund has a relatively low expense ratio, reflecting its passive management approach.
Investment Details:
- Minimum Investment: The minimum investment amount is ₹5,000, with a minimum additional investment of ₹1,000.
- Demat Account Requirement: Investors must have an active demat and trading account to invest in this ETF.
- Taxation: Gains from the ETF are subject to capital gains tax. Short-term capital gains (if units are redeemed within 3 years) are taxed as per the investor’s applicable income tax slab. Long-term capital gains (if units are redeemed after 3 years) are taxed at 20% post-indexation benefits.
Performance:
- Returns: As of January 7, 2025, the NAV of the Aditya Birla Sun Life Gold ETF is ₹68.42. The fund has delivered returns of 21.61% over the past year, 15.96% over the past three years, and 13.15% over the past five years.
- Risk Profile: The fund is categorized under high risk due to the inherent volatility in gold prices.
How to Invest:
- Direct Investment: Units can be purchased directly from the Aditya Birla Sun Life Mutual Fund website or through platforms like MF Central and MF Utility.
- Through Stock Exchanges: Units are listed on stock exchanges and can be bought or sold through a demat account.
Considerations:
- Market Risk: Investing in gold ETFs exposes investors to market risks associated with fluctuations in gold prices.
- Expense Ratio: While the fund has a low expense ratio, investors should consider this cost in relation to potential returns.
- Investment Horizon: Given the volatility of gold prices, a longer investment horizon may be beneficial to mitigate short-term fluctuations.
Is Aditya Birla Sun Life Gold ETF Good?
The Aditya Birla Sun Life Gold ETF can be a good investment option depending on your financial goals, risk tolerance, and investment horizon. Here’s a breakdown of factors to consider when deciding if it’s a good choice for you:
Advantages:
(1) Exposure to Gold:
- If you want exposure to gold without the complexities of owning physical gold, this ETF could be a great option. It tracks the price of gold, offering a way to invest in it passively.
(2) Liquidity:
- Since it’s listed on stock exchanges, it provides high liquidity, making it easy to buy and sell units at market prices.
(3) Cost-Effective:
- With a relatively low expense ratio compared to actively managed funds, this ETF can be a cost-effective way to invest in gold.
(4) Diversification:
- If your portfolio is not well-diversified, gold ETFs like this one can act as a hedge against market volatility and inflation.
(5) Performance:
- It has delivered decent returns, outperforming traditional forms of gold investments, and in the past year, it has seen returns of over 20%.
Disadvantages:
(1) Market Risk:
- The price of gold can be volatile, and while gold tends to be a safe haven in some market conditions, it can also underperform, especially during periods of economic growth.
(2) Short-Term Fluctuations:
- If you’re looking for a short-term investment, this ETF might not be the best due to the inherent volatility of gold prices. A longer-term horizon might yield better results.
(3) Taxation:
- Gold ETFs are taxed similarly to other investments. Short-term gains are taxed at your applicable income tax slab, while long-term gains are taxed at 20% after indexation. This could reduce your returns depending on your holding period.
(4) Dependence on Gold Prices:
- The performance is tied directly to the price of gold. If gold prices are stagnant or decline, the ETF will likely not perform well either.
Suitability:
- For conservative investors or those seeking a safe haven, this ETF can be a solid choice.
- Aggressive investors, this might not provide the high returns they seek, especially if they’re looking for rapid growth in a short time.
- Diversification in a portfolio or a hedge against inflation, gold ETFs can be a smart inclusion.
Conclusion:
If you’re comfortable with the risks associated with gold prices and have a long-term investment horizon, Aditya Birla Sun Life Gold ETF could be a good fit. However, it’s important to weigh it with other investments for better diversification and balance in your portfolio.
Aditya Birla Sun Life Gold ETF Top Holdings
The Aditya Birla Sun Life Gold ETF primarily holds physical gold, with its investment strategy focused on acquiring and holding gold bars or bullion of 99.5% purity. Since it is an ETF designed to track the price of gold, its “holdings” are essentially the amount of gold it owns, rather than stocks or bonds.
Top Holdings:
- Gold Bars/Bullion (99.5% purity): This is the fund’s main holding. The ETF directly owns gold in the form of physical bullion, which is stored in secure vaults. The quantity of gold held is adjusted according to the value of the ETF and its assets under management (AUM).
Since the ETF is designed to replicate the performance of gold, the fund does not have a portfolio of stocks or other assets like some diversified equity ETFs. Instead, it holds a direct physical asset (gold) to track gold prices.
Additional Holdings:
- Cash and Cash Equivalents: The fund may hold a small percentage in cash or money market instruments, which are used for liquidity purposes to manage inflows, outflows, and operational expenses.
Key Point:
- The ETF’s performance is closely linked to the price of gold, and as such, it does not typically involve diversified holdings like other equity or bond-focused ETFs. Its sole purpose is to reflect gold prices, which makes it suitable for those looking to gain exposure to gold specifically.
Aditya Birla Sun Life Gold ETF Returns
The Aditya Birla Sun Life Gold ETF is designed to track the performance of gold prices by investing primarily in physical gold. Its returns are closely aligned with the price movements of gold in the market.
Historical Returns:
As of November 21, 2024, the fund’s trailing returns over different time periods were:
| Time Period | Fund Return | Category Return |
| 1 Year | 21.56% | 21.00% |
| 3 Years | 13.48% | 13.29% |
| 5 Years | 13.02% | 12.73% |
| Since Launch | 8.30% | – |
Key Points:
- Investment Objective: The fund aims to provide returns that closely correspond to the return provided by the price of gold through investment in physical gold.
- Expense Ratio: The fund has a relatively low expense ratio, reflecting its passive management approach.
- Taxation: Gains from the ETF are subject to capital gains tax. Short-term capital gains (if units are redeemed within 3 years) are taxed as per the investor’s applicable income tax slab. Long-term capital gains (if units are redeemed after 3 years) are taxed at 20% post-indexation benefits.
Considerations:
- Market Risk: Investing in gold ETFs exposes investors to market risks associated with fluctuations in gold prices.
- Investment Horizon: Given the volatility of gold prices, a longer investment horizon may be beneficial to mitigate short-term fluctuations.
Aditya Birla Sun Life Gold ETF Direct Growth
- ABSL Gold ETF: An exchange-traded fund that invests directly in physical gold.
- Aditya Birla Sun Life Gold Fund – Direct Plan Growth: A fund of funds scheme that invests in the Aditya Birla Sun Life Gold ETF.
Here’s a comparison of these two options:
Strengths of Aditya Birla Sun Life Gold ETF
(1) Gold-Backed Investment – The ETF invests in physical gold, making it a reliable way to gain exposure to gold prices without the hassle of physical storage.
(2) Liquidity – Being an exchange-traded fund, investors can buy and sell units on the stock exchange, offering high liquidity compared to physical gold.
(3) Hedge Against Inflation – Gold is often considered a safe-haven asset, helping investors hedge against inflation and currency fluctuations.
(4) No Storage Costs – Unlike physical gold, investors don’t have to worry about security or storage costs, as the fund manages the gold holdings.
(5) Transparent Pricing – Prices are linked to gold market rates, ensuring fair and transparent pricing compared to physical gold purchases, which may include additional charges.
(6) Tax Efficiency – Holding the ETF for over three years qualifies for long-term capital gains tax with indexation benefits, making it more tax-efficient than physical gold.
Risks of Aditya Birla Sun Life Gold ETF
(1) Gold Price Volatility – Gold prices fluctuate based on global demand, economic conditions, and geopolitical events, which can impact the ETF’s returns.
(2) Tracking Error – The ETF may not perfectly replicate gold price movements due to fund expenses, cash holdings, or other operational factors.
(3) Market Risks – While gold is a safe asset, sharp price declines can occur during periods of economic stability or rising interest rates, affecting returns.
(4) Expense Ratio – Though relatively low, the fund charges a small management fee, which can slightly reduce returns over time.
(5) Liquidity Risks – While ETFs are generally liquid, investors must check trading volumes to avoid price impact when buying or selling large quantities.
(6) Currency Fluctuations – Since gold is traded globally in U.S. dollars, any fluctuation in the USD/INR exchange rate can affect returns for Indian investors.
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