HDFC Gold ETF is an open-ended fund that aims to mirror the performance of gold by investing in gold bullion with a fineness of 0.995. This provides investors with a convenient and cost-effective method to gain exposure to gold without the challenges associated with purchasing, storing, and insuring physical gold.
Key Features of HDFC Gold ETF:
- Investment Objective: To generate returns that closely correspond to the performance of gold, subject to tracking errors.
Fund Details:
- Assets Under Management (AUM): ₹6,429 crore (as of November 30, 2024).
- Expense Ratio: 0.59%.
- Minimum Investment: ₹5,000.
- Exit Load: None.
Performance:
Since its inception on August 13, 2010, the fund has delivered an annualized return of 9.57%. Recent returns include 23.02% over 1 year, 16.76% over 3 years, and 13.30% over 5 years.
HDFC Gold ETF Share Price
As of January 9, 2025, the Net Asset Value (NAV) of HDFC Gold Exchange Traded Fund (ETF) is ₹67.26
The 52-week range for HDFC Gold ETF is between ₹52.90 and ₹71.09.
Trading Information:
- Ticker Symbol: HDFCMFGETF.
- Net Asset Value (NAV): ₹66.90 (as of January 10, 2025).
Benefits of Investing in HDFC Gold ETF:
- Diversification: Gold often acts as a hedge against market volatility and currency depreciation, providing diversification benefits to an investment portfolio.
- Convenience and Safety: Investors can buy and sell units on the stock exchange, eliminating concerns related to the storage and security of physical gold.
- Liquidity: The ETF structure allows for easy entry and exit, offering liquidity similar to stocks.
- Transparency: Prices are transparent and reflect real-time market movements, ensuring fair value transactions.
Considerations:
- Market Risk: The fund’s performance is directly linked to gold prices, which can be volatile.
- Tracking Error: There may be slight deviations between the fund’s performance and the actual price of gold due to expenses and other factors.
How to Invest:
Investors can purchase units of HDFC Gold ETF through their trading and Demat accounts on the NSE or BSE, similar to buying shares of a company. It’s advisable to consult with a financial advisor to ensure this investment aligns with your financial goals and risk tolerance.
Key Differences Between HDFC Gold Fund and HDFC Gold ETF
| Feature | HDFC Gold Fund | HDFC Gold ETF |
| Nature | Open-ended mutual fund scheme | Exchange Traded Fund (ETF) |
| Investment Objective | Invests in units of HDFC Gold ETF | Directly invests in physical gold |
| Mode of Investment | Can be purchased directly from HDFC AMC or distributors | Traded on stock exchanges like NSE and BSE |
| Minimum Investment | ₹5,000 for lump sum investment | 1 unit (approximately 1 gram of gold equivalent) |
| Trading Requirement | No Demat account required | Requires Demat and trading account |
| Liquidity | Redeemable with the fund house | Bought and sold on the stock exchange |
| Expense Ratio | Slightly higher due to fund management and operating expenses | Lower due to fewer operational expenses |
| Pricing | NAV (Net Asset Value) declared at the end of each trading day | Market-determined real-time prices during trading hours |
| Exit Load | May apply for withdrawals within a specific period | No exit load |
| Flexibility | Suitable for SIP (Systematic Investment Plan) | No SIP option |
| Gold Exposure | Indirect through ETF units | Direct, backed by physical gold |
Which One to Choose?
- HDFC Gold Fund:
Ideal for investors without a Demat account or those who prefer systematic investments (SIP) for building gold exposure gradually.
- HDFC Gold ETF:
- Suitable for investors with a Demat account who seek real-time trading flexibility and lower expense ratios. It provides more precise exposure to gold prices.
Pros:
- Diversification: Provides exposure to gold, which can act as a hedge against market volatility and inflation.
- Convenience: Eliminates the need for physical storage and security concerns associated with holding gold.
- Cost-Effective: Lower expense ratio compared to some other gold investment avenues.
Cons:
- Market Risk: The fund’s performance is directly linked to gold prices, which can be volatile.
- Tracking Error: There may be slight deviations between the fund’s performance and the actual price of gold due to expenses and other factors.
Conclusion:
HDFC Gold ETF offers a practical and efficient way to invest in gold, especially for those looking to diversify their portfolio without dealing with the complexities of physical gold ownership. Its performance has been in line with gold price movements, and it provides the added benefits of liquidity and ease of transaction through stock exchanges. However, potential investors should be aware of the inherent risks associated with gold price volatility and consider their investment horizon and risk tolerance before investing.
HDFC Gold ETF Returns Overview
HDFC Gold ETF has shown strong performance over time, closely tracking the price movements of gold in the market.
| Period | Return (%) |
| 1 Year | ~21.38% |
| 3 Years (Annualized) | ~15.96% |
| 5 Years (Annualized) | ~13.10% |
| Since Inception (August 13, 2010) | ~9.54% |
Performance Highlights
- The fund’s returns reflect trends in global gold prices, making it a strong performer during times of market uncertainty or economic instability.
- Gold’s safe-haven appeal has contributed to steady long-term returns, making HDFC Gold ETF an attractive option for investors seeking portfolio diversification.
- Short-term volatility is present due to fluctuations in gold prices influenced by market dynamics like interest rates and geopolitical events.
Factors Influencing Returns
- Gold Price Movements: Directly affects the ETF’s performance.
- Currency Fluctuations: Changes in USD/INR rates can impact gold prices in India.
- Inflation Trends: Gold often performs well during periods of high inflation.
HDFC Gold ETF Growth Overview
HDFC Gold ETF Growth option focuses on capital appreciation by investing in physical gold of high purity (99.5% or higher). The table below outlines the performance of the fund over key periods:
| Time Period | NAV (₹) | Returns (%) |
| 1 Month | 67.26 | ~3.2% |
| 6 Months | 65.10 | ~5.7% |
| 1 Year | 55.46 | ~21.4% |
| 3 Years (Annualized) | 41.98 | ~15.96% |
| 5 Years (Annualized) | 37.31 | ~13.10% |
| Since Inception (Aug 13, 2010) | 21.01 | ~9.54% |
Key Features of HDFC Gold ETF Growth
| Attribute | Details |
| Fund Type | Open-ended commodity-based ETF |
| Investment Strategy | Invests in physical gold |
| Benchmark Index | Domestic gold prices |
| Expense Ratio | ~0.59% |
| Minimum Investment | 1 unit (~1 gram equivalent) |
| Demat Requirement | Mandatory for trading |
Investment Suitability
- Diversification: Provides portfolio protection during market volatility.
- Long-Term Wealth Creation: Ideal for long-term investors seeking gold exposure without physical storage.
- Taxation: Long-term capital gains are taxed at 20% with indexation if held for over 36 months.
Conclusion
HDFC Gold ETF Growth is a solid choice for investors who want to capitalize on gold price movements while enjoying the convenience and liquidity of trading on exchanges.
Strengths of HDFC Gold ETF
(1) Gold Exposure:
- Provides a direct investment in gold, offering a hedge against inflation, currency fluctuations, and market uncertainties.
- Gold is often seen as a safe-haven asset during times of market volatility or geopolitical instability.
(2) Liquidity:
- The ETF is listed on stock exchanges (NSE and BSE), allowing investors to buy and sell units anytime during market hours.
- Unlike physical gold, there’s no concern about storage, security, or insurance.
(3) Low Expense Ratio:
- The expense ratio of around 0.59% is relatively low compared to actively managed mutual funds or other forms of gold investment.
(4) No Making Charges or Taxes on Buying/Selling Physical Gold:
- Investors do not need to pay additional making charges or taxes that are associated with buying and selling physical gold jewelry or coins.
(5) Transparency and Regulation:
- Being managed by a reputable asset management company (HDFC AMC), the ETF is regulated by the Securities and Exchange Board of India (SEBI), ensuring transparency and accountability.
(6) Tax Efficiency:
- Long-term capital gains (held for more than 36 months) are taxed at a favorable rate of 20% with indexation benefits, which is beneficial for long-term investors.
Risks of HDFC Gold ETF
(1) Gold Price Volatility:
- The value of HDFC Gold ETF is directly linked to the price of gold, which can be volatile. Factors like geopolitical instability, changes in interest rates, and fluctuations in demand for gold can cause significant price swings.
(2) Tracking Error:
- Although HDFC Gold ETF aims to track gold prices, there may be minor deviations (tracking errors) due to fund management costs, storage fees, or other operational factors.
(3) Market Risk:
- As a market-traded instrument, HDFC Gold ETF’s price can be influenced by market conditions, including demand and supply factors, investor sentiment, and overall equity market trends.
(4) No Dividend Payments:
- As a commodity ETF, HDFC Gold ETF does not pay dividends. All returns come from the appreciation of the underlying gold prices, which may not be suitable for income-seeking investors.
(5) Currency Risk:
- In India, gold prices are influenced by international currency fluctuations (especially the USD/INR exchange rate). A weaker rupee can drive up gold prices, and a stronger rupee could lead to a decrease in gold prices.
(6) Regulatory Risk:
- Changes in government policies, such as taxation or import duties on gold, could impact the price of gold and thus the performance of the ETF.
(7) Demat Account Requirement:
- Investors need a Demat account to hold and trade units of HDFC Gold ETF, which could be a barrier for new or less tech-savvy investors.
Conclusion
HDFC Gold ETF is a strong option for investors seeking to gain exposure to gold without the complexities of physical gold. It offers liquidity, low cost, and gold price-linked returns, making it an attractive choice for long-term wealth creation and portfolio diversification.
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