The Rise of ETFs in India
ETFs have become a growing trend in India, providing a diversified investment approach that combines the ease of trading like a stock with the broad exposure of a mutual fund. In the 5th master-class of this series, Gurmeet Chaddha, Managing Partner and Chief Investment Officer at Complete Circle Wealth, and Chintan Haria, Principal of Investment Strategy at ICICI Prudential Asset Management, highlight the benefits of commodity ETFs—specifically gold and silver—and how they can strengthen an investor’s portfolio.
The Growing Popularity of Commodity ETFs
While physical gold and silver have always been valued in India, digital assets like gold and silver ETFs are increasingly popular. “Gold and silver ETFs offer a lot of convenience,” says Haria. “They provide institutionalised storage, security, and purity, making them a safer and more accessible option than physically storing large quantities of metals.”
Chaddha highlights another benefit: “Gold ETFs are now tax-friendly, with a flat 12.5% tax after holding for 12 months, making them a smart choice for long-term investors.”
Why Gold and Silver ETFs?
Gold and silver have long been viewed as safe-haven investments, offering protection during crises. “Gold has consistently provided hedging benefits,” explains Gurmeet Chaddha, citing past downturns like the 2008 financial crash and the COVID-19 pandemic. Silver, meanwhile, presents a unique opportunity as both a precious and industrial metal, with demand rising from sectors like solar energy and technology.
“Silver is not only a precious metal but also an industrial metal,” adds Haria. “While its price is more volatile than that of gold, it offers unique investment opportunities due to its industrial uses.”
Gold vs. Other Investment Avenues
When comparing gold ETFs to other investment options like Sovereign Gold Bonds (SGBs) or physical gold, each has its advantages. SGBs provide a 2.5% annual yield and tax-free returns after an eight-year holding period, making them attractive for long-term investors. However, gold ETFs offer greater liquidity and ease of trading.
“Gold ETFs provide much more liquidity,” notes Haria. “They are easier to enter and exit compared to Sovereign Gold Bonds, which are less liquid and often trade at a premium.”
Looking Ahead: The Future of Gold and Silver ETFs
As we move into the next decade, demand for gold and silver is expected to rise, driven by inflationary pressures and geopolitical instability. “Inflation is a key factor that benefits commodity prices,” says Haria. “Silver and gold will likely see increased demand, and their roles in portfolios are expected to grow.”
A Pro Tip for Investors
One key takeaway from the master-class is the importance of patience and a long-term view. Gurmeet Chaddha advises investors not to chase short-term returns but to focus on building a diversified portfolio that includes commodities like gold and silver for stability and hedging.
“Don’t chase near-term returns,” says Chaddha. “Returns in commodities can be lumpy—there may be years of little to no growth followed by sharp gains. The key is to stay invested for the long term and ensure your portfolio is diversified.”
Haria adds, “For those who find direct commodity investing too complex, multi-asset funds offer a great solution. These funds allow a professional fund manager to decide the right mix of gold, silver, bonds, and equities for your portfolio.”
Bouquet of Benefits
The master-class highlighted that ETFs, particularly those focused on commodities like gold and silver, are valuable tools for portfolio diversification. They offer a cost-effective and flexible way to invest in precious metals without the challenges of physical storage. As Chintan Haria and Gurmeet Chaddha suggest, incorporating gold and silver into your investment strategy—whether through ETFs or multi-asset funds—can provide stability and long-term growth potential. They also advised investors to choose wisely, diversify well, and enjoy the journey of investing in gold and silver over the coming decade.
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