- Trang Chủ
- Quỹ đầu tư
- An outlook on investing in gold ETFS with special reference to small investor’s
Xem mẫu
- INTERNATIONAL JOURNAL OF MANAGEMENT (IJM)
ISSN 0976-6502 (Print)
ISSN 0976-6510 (Online)
IJM
Volume 7, Issue 2, February (2016), pp. 291-297
http://www.iaeme.com/ijm/index.asp ©IAEME
Journal Impact Factor (2016): 8.1920 (Calculated by GISI)
www.jifactor.com
AN OUTLOOK ON INVESTING IN GOLD ETFS WITH SPECIAL
REFERENCE TO SMALL INVESTOR’S
Dr. G. Radhika
Assistant Professor, Department of Commerce,
Valluvar College of Science and Management, Karur
ABSTRACT
Finance is one of the basic foundations of all kinds of economic activities. It is the master
key which provides access to all the financial sources for being employed in all the activities
of human. It is often said that human needs money to make more money. However, it is also
true that money begets more money, only when it is properly handled.
The assortment of option that an investor can desire from at the current moment, making
an investment decision can be truly irresistible. From the whole range of investments, ranging
from stocks, bonds, real estate, Government securities to unusual metals like gold and silver,
an investor must create a portfolio that can effectively help him to meet his or her short,
medium and long term financial goals. With gold prices at an all time high right now, many
investors are investing towards GOLD ETFs as an investment avenue.
This paper presents the features, pros and cons and various types of Gold ETFs which
acts as a positive catalyst for the investing by small investor’s
Key words: Finance, Investor’s, Gold investment, Gold ETFs, Securities
Cite this Article: G. Rathika. An Outlook on Investing in Gold ETFS with Special Reference
to Small Investor’s. International Journal of Management, 7(2), 2016, pp. 291-297.
http://www.iaeme.com/ijm/index.asp
1. INTRODUCTION
Gold ETFs are exchange traded funds that are meant to track closely the price of physical gold. So gold
ETF lets the investors to own gold in their Demat account. Each unit of the ETF lets the investor own
1gm of gold without physically owning it. Thus investing in a gold ETF provides the benefits 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).
291
G. Rathika, “An Outlook on Investing in Gold ETFS with Special Reference to Small Investor’s” –
(ICAM 2016)
- International Journal of Management (IJM), ISSN 0976 – 6502(Print), ISSN 0976 -
6510(Online), Volume 7, Issue 2, February (2016), pp. 291-297 © IAEME Publication
2. REVIEW FF LITERATURE
Paul Baiocchi (2012) in his article stressed that gold ETF’s appear to be same until the expense ratio
were valued. The retail gold ETF has increased demand in the previous years and the trend has excelled
in the coaring years also.
Deepan (2012), investors who were interested in gold has several options. 1. Buying gold
jewellery coins or bars and hold them at home or in a safety box, 2) buy gold certificates from a bank a
dealer 3) buy gold futures contract 4) buy gold exchanges traded funds. The main problem is liquidity
of selling gold. Gold certificates are trusted and safe. Futures contracts can provide a large amount of
leverage and are very attractive. But gold ETF offers a wide variety of advantages which provides
safety, liquidity and returns.
Cary (2013) has stated that the holdings of gold ETF’s have dropped by nearly four million
ounces (125 tonned) in the year 2011. It is because that physical market for gold is witnessing roburt
support. Since 2004, the gold backed ETF’s are becoming popular since 2004. Which was accelerated
the investment in equity markets.
Maulzi (2013) in his work has stated that the demand for gold exchange traded funds in India is
likely to explode as investors get accustomed to “click and par” mode of investing. He further addes
that, gold prices in India have gained 29 percent in the year 2011, and they have added 15 percent gains
in the stock market.
Vipul (2013) in his research paper that gold ETF invests directly into gold, where as a gold fund
invests in a gold ETF. On the other hand, gold funds are bought like regular open ended mutual funds.
The NAV of both kinds have higher fund charges as per the fluctuations in the price of gold. The gold
fund will be 0.5 percent to 1 percent costlier than gold ETFs.
3. STATEMENT OF THE PROBLEM
Conventionally, Indians likes to procure gold and they crave to acquire it. In fact, they hardly go for
ETFs. But in India, during the last one year, investment in gold ETFs has risen. India is one of the
largest consumers of gold. While conformist investment options like jewellery, gold bars and coins
still exist, Gold ETFs are another effectual way to invest in the yellow metal.
Most of the investors generally have limited informations about the developments in the securities
markets. Informations about the financial performance of the companies and data of share market is
available to investor are also limited. Sometimes the informations which are gathered from newspapers,
television, internet and media may not be sufficient for investment decision making. All these problems
made them rely on share brokers, fund managers and experts to invest in securities. Investors desiring
to invest in stocks require a lot of preparation and homework. It is very important for them to know
their risk appetite and investment objectives for better decision making. Hence, the present study is an
attempt to know the investment pattern of investors. The study is made to examine an outlook of
investing in Gold ETFs with reference to small investors’ with reference to Karur City.
4. OBJECTIVE OF THE STUDY
1. To ascertain the reasons that influences the investors for investing in Gold Exchange Traded
Funds (ETF)
2. To analyse the various reasons for investing in Gold ETFs.
3. To offer suggestions based on the findings.
5. METHODOLOGY
Research Methodology is a way to systematically solve the research problems. It includes the overall
research design, sampling procedure, data collection method and analysis.
6. RESEARCH DESIGN
Descriptive research has been adopted in this study, which includes surveys and fact findings of
different kinds of investor’s. This helps the researchers to portray the current circumstance that makes
the analysis of investments in gold ETFs and their feedback over it.
292
G. Rathika, “An Outlook on Investing in Gold ETFS with Special Reference to Small Investor’s” –
(ICAM 2016)
- International Journal of Management (IJM), ISSN 0976 – 6502(Print), ISSN 0976 -
6510(Online), Volume 7, Issue 2, February (2016), pp. 291-297 © IAEME Publication
7. SAMPLE SIZE AND SAMPLING METHOD
This study relates to the outlook of investor’s with reference to investing towards the Gold ETFs.
Primary and Secondary data has been mainly used.
The sample size consists of 500 respondents. Convenience random sampling method has been
adopted for the collection of data through structured questionnaire method.
There is mixture of both primary and secondary data in this study. The primary data has been
collected with the help of structured interview. The basic ideas and relevant concepts of the study were
collected from books and websites.
8. STUDY LOCATION
This study was conducted with investors in gold ETFs in investment industries at Karur city.
9. LIMITATIONS OF THE STUDY
The primary data is subject to personal bias and cannot be relied upon. The sample is taken according
to researcher’s convenience and hence the sample does not represent the universe. The study is limited
to a small area in Karur city and does not cover the whole area. Due to want of time, entire universe of
the study was not covered.
10. TYPES OF GOLD ETFS
There are various types of gold ETFs, so investors can select any gold ETFs according to his
investment strategies.
Gold ETFs that contains gold products: In this type the investors can invest in gold without
actually buying gold and storing them in safely. Gold ETFs like IAU and GLD follow the
performance of gold including gold products.
Gold ETFs that contains gold futures: Some types of gold ETFs are constructed in a special
way to track the performance of gold. Gold ETF alike to DGL which is consists of derivatives
like futures, forwards and options in order to imitate a gold index. The construction strategy
which is used not only for gold ETFs but also used for many commodity ETFs as well.
Gold industry ETFs: In this type of gold ETF consists of companies in the gold industry.
Like a sector ETF, this kind of gold ETF also tracks the performance of companies which are
greatly depended on gold as their key business. For example, GDX tracks the performance of
the Amex Gold Miners Index which consists of companies in the gold mining industry.
More than gold ETFs: When an investor would like to invest in more than one precious
metal then there is gold ETF which include multiple metal products. A precious metal ETF
like DBP, the power shares DB precious metals for gold investors ETF can fit for their
portfolio.
Short Gold ETFs: Acting like a reverse ETF, a short gold ETF is distinctively constructed to
inversely follow the performance of a gold ETF index.
Table 1 Reason for Investing In Gold ETFs
S.No Reasons for investing in Gold ETF Respondents Percent
1 To Meet The Higher Education Of Children 141 28.2
2 Marriage Of Children 84 16.8
3 Prestige 94 18.8
4 Tax Benefit 92 18.4
5 Capital Appreciation 89 17.8
Total 500 100.0
Source: Primary data
293
G. Rathika, “An Outlook on Investing in Gold ETFS with Special Reference to Small Investor’s” –
(ICAM 2016)
- International Journal of Management (IJM), ISSN 0976 – 6502(Print), ISSN 0976 -
6510(Online), Volume 7, Issue 2, February (2016), pp. 291-297 © IAEME Publication
The above table states that majority of the sample respondents are investing in the Gold ETFs, as
to meet the higher education for their children and it constitutes (28.2%) of the total sample
respondents. Nearly (37.2%) of the sample respondents were investing in the gold ETFs for prestige
and to avail tax benefit with a percentage share of 18.8 and 18.4 respectively. (17.8%) of the sample
respondents invest in gold ETFs for capital appreciation.
The amount invested in any scheme is completely depended on the spending and saving habits of
individual households. The larger the savings the amount of investment will be higher.
Table 2 Amount invested in Gold ETF
S.No Amount invested Respondents Percent
1 Less than 3,000 192 38.4
2 3,001-6,000 144 28.8
3 6,001-12,000 62 12.4
4 Above 12,000 102 20.4
Total 500 100.0
Source: Primary data
It is clear from the above table that nearly (38.4%) of the sample respondents have invested up to
less than Rs.3,000, (28.8%) of them have invested up to Rs.3,001- Rs.6,000, (20.4%) of them have
invested above Rs.12,000, and a remaining (12.4%) of them have invested up to Rs.6,001- Rs.12,000.
Table 3 Frequency of Investment in Gold ETF
S.No Frequency of investment Respondents Percent
1 Monthly 83 16.6
2 Quarterly 179 35.8
3 Half yearly 102 20.4
4 Annually 136 27.2
Total 500 100.0
Source: Primary data
It is noted from the information given that most of the respondents were investing on a Quarterly
basis (35.8%) of the total sample, (27.2%) of the total sample respondents have the habit of investing in
gold ETF on annual pattern, (20.4%) of them invest on a half yearly basis, and a least of (16.6%) of
them invest in gold ETF on a monthly basis. It is always important to know the persons, who actually
participate in the decision making process while investments are made by the small and individual
investors. In this context, the sample investors are asked to identify the persons, who normally assisted
or participated in the process of investment decision making.
Table 4 Advice received while investing
S.No Advice Respondents Percent
1 Broker 107 21.4
2 Friends 149 29.8
3 Own Analysis 101 20.2
4 Suggestions Given By TV/Newspaper 143 28.6
Total 500 100.0
It can be noted from the data contained in table that a majority of the investors have taken the
assistance of their friends in taking the investment decision. Nearly 28.6% of the total sample
294
G. Rathika, “An Outlook on Investing in Gold ETFS with Special Reference to Small Investor’s” –
(ICAM 2016)
- International Journal of Management (IJM), ISSN 0976 – 6502(Print), ISSN 0976 -
6510(Online), Volume 7, Issue 2, February (2016), pp. 291-297 © IAEME Publication
respondents stated that they take the suggestions given by TV/newspapers, 21.4% of them take the
suggestions given by broker and a remaining 20.2% of them make their own analysis while investing in
gold ETFs.
In general the gold market is highly subjected to fluctuations. In the highly fluctuated market, the
sample respondents have the fear of investing in gold will be earn profits as the gold prices will even
move higher.
Table 5 Reasons for Buying Gold ETF's
S No Reasons for buying Gold ETF Respondents Percent
1 Dollar Value Is high 166 33.2
2 interest rate is low 71 14.2
3 Check Gold To Oil Ratio 57 11.4
4 Political Uncertainty 74 14.8
5 Global Melt Down 132 26.4
Total 500 100.0
Source: Primary data
It is observed from the table that 33.2% of the sample investor invest in gold ETFs when the
Dollar value is high, 26.4% of them will invest in gold ETFs when there is a Fluctuation in oil price,
14.8% of them invest when there is a political certainty, 14.2% of them will invest when the Returns
rate is high, and a 11.4% of them will invest in gold ETFs when there is an Equivalence to gold to oil
ratio.Every household investor has different types of investment strategies while investing in gold
ETFs. Without a strategy formulation, investing in gold ETFs will definitely result in a loss. In order to
carryout the strategies are classified into four viz., Sell gold ETFs, with in a few days or months or
within a year, As soon as the prices reaches high, Keep revising the target as price rise, Not interested
in selling. The details of the classification were shown under.
Table 6 Investment Strategies in Gold ETFs
S No Investment Strategies In Gold ETFs Respondents Percent
1 Sell Gold ETFs with in a Few days or Months or with in a Year 170 34.0
2 As soon as the Price reaches high 101 20.2
3 Keep revising the Target as price rises 77 15.4
Not interested in Selling
4 152 30.4
Total 500 100.0
Source: Primary data
A majority of the 64.4% of the sample respondents have strategies on selling gold ETF within a
few days or months or within a year with a percentage share of 34. 30.4% of the sample respondents
were not interested in selling gold ETF’s. 20.2% of the sample respondents have a strategy of gold ETF
as soon as the price reaches high, and a least of 15.4% of the sample respondents keep revising the
target as price rises.
295
G. Rathika, “An Outlook on Investing in Gold ETFS with Special Reference to Small Investor’s” –
(ICAM 2016)
- International Journal of Management (IJM), ISSN 0976 – 6502(Print), ISSN 0976 -
6510(Online), Volume 7, Issue 2, February (2016), pp. 291-297 © IAEME Publication
Table 7 Types of Gold ETF
S No Types of Gold ETF Frequency Percent
1 DGL 115 23.0
2 GDX 95 19.0
3 DGP 82 16.4
4 DBP 111 22.2
5 GLL 97 19.4
Total 500 100.0
Source: Primary data
There exist various types of Gold ETF’s in the current scenario. Each ETF will have the common
structure but varied benefits. In order to find the various schemes, the types are classified under viz
DGT, GDX, DGP, DBP, GLL and the information derived is listed in the above table, it is noted from
the table that 23% of the sample respondents invest in DGL, 22.2% of the sample respondents have
invested in DBP gold ETF, 19.4% of the sample respondents have invested in GLL gold ETF, and the
remaining 35.4% of the investors have invested in GDX, DGP gold ETF’s by sharing 19% and 16.4%
respectively.
11. FINDINGS
The findings of the analysis are as follows:
Out of total respondents 28.2% of the sample investors have invested in Gold ETF’s as to
meet their children higher education.
Nearly 38.4% of the respondents have invested in Gold ETF’s whose investment amount is
less than Rs.3000.
A majority of 35.8% of the respondents have invested on a monthly basis in Gold ETF’s.
While investing in Gold ETF’s 29.8% of the respondents were listening to their friends’
opinion.
A greater part of the respondents were buying Gold ETF’s when the dollar prices were high.
Almost half of the sample respondents sell their Gold ETF’s after a month or within a year.
A majority of 23% of the sample respondents invest in DGL.
12. SUGGESTION
The objective of motivating the public to invest their savings in the stock market will be achieved only
if the regulatory authorities succeed in providing a manipulation free stock market. With the rate of
interest offered by banks on deposit being very unattractive, more people could think of vesting in the
stock market. This could happen only if the stock market is transparent and free from scams because
those who invest in bank deposits are basically a verse to risk. The awareness about investment
avenues should be given to the small investor’s which will help them to invest more.
13. CONCLUSION
A Gold saving fund offers the option of methodical investment plans which are apposite for those who
want to invest in disciplined manner on a long term basis. There are so many reasons behind the growth
and emergence of Gold ETFs such as fluctuation equity market, weakening of Indian Rupee against US
Dollar and growing uncertainty about global economy. All these factors make Gold ETFs as a strong
asset. On the other hand, Gold ETFs provide the opportunities to institutional investors as well as to
small investors, to make investment in gold through ETF scheme.
The festival season is upon us and our people will fall over each other to buy gold, never mind the
prices. While physical gold is favorite among the masses, there exists a better way to invest in Gold
ETFs. Gold ETFs have been a success story around the world.
296
G. Rathika, “An Outlook on Investing in Gold ETFS with Special Reference to Small Investor’s” –
(ICAM 2016)
- International Journal of Management (IJM), ISSN 0976 – 6502(Print), ISSN 0976 -
6510(Online), Volume 7, Issue 2, February (2016), pp. 291-297 © IAEME Publication
Gold ETFs are listed on the stock exchange so the investor's can buy and sell them like equities.
They are very liquid. They are extremely safe. Since they are not in physical nature, the investor does
not have to spend sleepless nights worrying about someone breaking into our home or bank locker.
Gold ETFs are in paper form and it also makes a favorite among investor's. Retail investor's can buy
gold as little as 1 gram or less. It also contains 24 carat gold and purity.
REFERENCE:
[1] Paul Baiocchi, “Not all physical gold ETFs built the same”, Index universe.com
December 18, 2012.
[2] Deepan, “investing via Gold ETF” April 24, 2012, the Indian express.
[3] Cary, “Gold ETF outflows paint only half the picture, Gold speculator data base,
research.com March 18, 2013.
[4] World Gold Council. (2010). Gold Demand Trends. [Online] Available: www.gold.org.
[5] "How to invest in Gold" retrieved on Dec 3, 2011 from
http://www.wisdomtimes.com/how-to-invest-in-gold-in-india/
[6] Pilgrim Gray retrieved on Dec 3, 2011 from http://www.buzzle.com/articles/is-gold-a-
good-investment.html
[7] Rustagi , R.P., "Financial Management" , Third edition (2006) ISBN 81-85989-28-1
[8] An Asset for all times.(2011) "Do More Money Talk" , Priority Pages , Vol 37 , Apr -
June 2011 , pages 5-7
[9] http://articles.economictimes.indiatimes.com/2011-10-25/news/30320137_1_gold-etf-
physical-gold-etf-route
[10] http://etfdailynews.com/2012/07/17/gold-etf-investors-disappointed-by-federal-reserve-
chairman-ben-bernanke-gld-iau/#more-61689
[11] http://articles.economictimes.indiatimes.com/2009-05-20/news/28407150_1_gold-etfs-
gold-exchange-gold-prices
297
G. Rathika, “An Outlook on Investing in Gold ETFS with Special Reference to Small Investor’s” –
(ICAM 2016)
nguon tai.lieu . vn
