What Is Gold BeES / Gold BeES ETF?

What Is Gold BeES / Gold BeES ETF?

Gold BeES, also known as the Gold Benchmark Exchange Traded Scheme (ETF), is a financial product that allows investors to invest in gold through the stock exchange. It is India’s first gold ETF and has been designed to track the price of physical gold. 

This investment option is particularly attractive to investors who wish to diversify their portfolio and protect their wealth from inflation, as gold has traditionally been a safe-haven asset that retains its value during economic uncertainty. With its ease of trading, liquidity, and lower costs than traditional gold investments, Gold BeES ETF has gained popularity among Indian investors in recent years.

Contents:

Ways Of Investing In Gold

Here are the 5 ways through which you can invest in gold: 

  • Physical Gold
  • Electronic Gold
  • Gold Bees ETF
  • Sovereign Gold Bonds
  • Gold Funds

1. Physical Gold

Physical gold is a popular form of investment in India, particularly in gold jewelry. As of 2021, India is the world’s second-largest consumer of gold, with a consumption rate of 700-800 tons per year. However, investing in physical gold has its drawbacks. 

According to the World Gold Council, the demand for gold jewelry in India declined by 42% in 2020 due to the COVID-19 pandemic. Additionally, the premium charged by jewelers for buying physical gold can be as high as 25%, which significantly affects the return on investment.

2. Electronic Gold

Electronic Gold or E-Gold, is a digital way of investing in gold. It was launched in India in 2010 by the National Spot Exchange Limited (NSEL). One unit of E-Gold is equivalent to one gram of physical gold, and investors can buy or sell it online through a broker or a trading platform. 

E-Gold offers many advantages, such as lower transaction costs, higher transparency, and ease of storage. As of 2021, more than 10,000 investors in India have invested in E-Gold, and its trading volume has increased by 48% in the past year.

3. Gold BeES ETF

Gold BeES ETF is India’s first gold ETF, launched in 2007. Gold BeES tracks the price of physical gold and allows investors to buy or sell gold in small units. As of February 2024, Gold BeES has an AUM (Assets Under Management) of INR 9,750 crores, making it one of the most popular gold investment options in India. The expense ratio of Gold BeES is 0.50%, which is lower than the expense ratio of other gold mutual funds in India.

4. Sovereign Gold Bonds 

Sovereign Gold Bonds (SGBs) are government-backed securities that allow investors to invest in gold without actually owning physical gold. SGBs were launched in India in 2015, and as of 2021, they have issued 49 tranches, raising INR 60,830 crores from investors. 

SGBs offer many advantages, such as a fixed interest rate of 2.5% per annum, no storage or security concerns, and a capital gain tax exemption if held till maturity. SGBs can be purchased from banks, post offices, the National Stock Exchange (NSE), and the Bombay Stock Exchange (BSE).

5. Gold Funds

Gold funds are mutual funds that invest in gold mining companies or other gold-related assets. Gold funds can offer higher returns than physical gold as they invest in the gold value chain, including mining, exploration, and production. 

As of 2021, there are 10 gold mutual funds available in India, with an average AUM of INR 273 crores. However, gold funds can also be riskier than physical gold or other gold investment options, as they are subject to market fluctuations and company-specific risks.

Here’s a comprehensive table comparing the historical returns of different gold investment options in India:

Gold Investment OptionHistorical Returns
Physical Gold (gold coins)4.5-5.5% per annum
Physical Gold (gold bars)4-6% per annum
E-Gold6-7% per annum
Gold BeES ETF9.5-10.5% per annum
Sovereign Gold Bonds (SGBs)2.5% per annum (fixed)
Gold Funds8-9% per annum (average)

Gold Returns Vs. Equity Returns

The main difference between Gold returns and Equity returns is that Gold’s value is primarily driven by supply and demand dynamics, geopolitical tensions, inflation, and currency fluctuations, while Equity returns are influenced by a company’s financial performance, profitability, growth prospects, management decisions, and overall market sentiment.

Comparing Gold Returns Vs. Equity Returns

Here is a table comparing the historical returns of gold and equity in India:

YearGold Returns (%)Sensex Returns (%)
20169.072.65
2017-2.4328.71
2018-5.926.43
201922.4514.38
202028.13-8.24
2021-3.2027.85

Tax For Gold BeES

Gold BeES or Gold ETFs are taxed as per the taxation rules for debt mutual funds in India. Here is a comprehensive guide on the tax implications of investing in Gold BeES:

  1. Short-term capital gains: If an investor sells their Gold BeES units within three years of purchase, the gains are considered short-term capital gains and are taxed as per the investor’s income tax slab rate.
  2. Long-term capital gains: If an investor sells their Gold BeES units after three years of purchase, the gains are considered long-term capital gains and are taxed as per the investor’s income tax slab rate.
  3. Dividend income: Gold BeES units may also provide dividend income to investors. The dividend income is taxed per the investor’s income tax slab rate. The fund house deducts the tax at source (TDS) at a rate of 10% if the dividend income exceeds ₹5,000 in a financial year. 

Here’s a table comparing the tax implications of Gold BeES with other popular gold investment options in India:

Investment OptionHolding PeriodShort-term Capital Gains TaxLong-term Capital Gains Tax
Gold BeESLess than 3 yearsAs per investor’s income tax slabAs per investor’s income tax slab
Gold ETFsLess than 3 yearsAs per investor’s income tax slabAs per investor’s income tax slab
Physical GoldLess than 3 yearsAs per investor’s income tax slab20% tax and 4% cess
Sovereign Gold Bonds (SGBs)Less than 3 yearsAs per investor’s income tax slabExempted from tax
Digital Gold (E-Gold)Less than 3 yearsAs per investor’s income tax slab20% tax and 4% cess

How To Invest In Gold BeES ETF India? 

One can invest in Gold BeES ETF through the Demat account just like any other normal shares. Here are the steps that you need to follow to invest in Gold BeES ETF: 

  • Open a Free Demat Account with Alice Blue, which takes only 15 minutes to complete the process.
  • Log in to the trading platform using your account credentials.
  • Use the search bar to find the ETF you want to invest in.
  • Place an order to buy the chosen ETF, similar to how you would buy stocks.
  • ETFs trade at an indicative Net Asset Value (NAV) on a real-time basis.
  • You will get the ETF units at the real-time NAV when your order is executed.
  • The ETF units will be credited to your demat account on T+2 Days (T being the transaction day).
  • You have the flexibility to sell the ETFs whenever you want.
  • Upon selling, the proceeds from the sale will be credited to your designated bank account on T+2 Days.

This process makes it convenient and straightforward for investors to invest in ETFs through Alice Blue’s platform, with the added benefit of low brokerage rates at ₹15 only.

Quick Summary

Frequently Asked Questions

1. What is Gold BeES?

Gold BeES (Benchmark Exchange Traded Scheme) is an ETF that allows investors to invest in gold and trade in them through the stock exchange. 

2. Is it good to invest in Gold BeES?

Yes, Gold BeES can be a good investment option for those who want to invest in gold but do not want to own physical gold. It has a low expense ratio, is highly liquid, and exposes investors to the price of gold.

3. Which company is Gold BeES?

Gold BeES is an exchange-traded fund managed by Reliance Mutual Fund. It is one of the oldest and largest gold ETFs in India, and it provides investors with exposure to the price of gold without actually owning physical gold.

4. Is Gold BeES and Gold ETF same?

Yes, Gold BeES is a type of gold exchange-traded fund (ETF). ETFs are investment funds traded on stock exchanges and can be bought and sold like stocks. Gold BeES is one of the oldest and largest gold ETFs in India.

5. How many Gold BeES is 1 gram?

The price of one unit of Gold BeES is generally equivalent to the price of 1 gram of gold. However, Gold BeES does not have a fixed conversion rate of BeES to grams of gold because the market demand and supply determine the price of BeES. 

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