A STUDY ON INVESTOR’S PERCEPTION TOWARDS INVESTING IN GOLD ETFS

OBJECTIVES To know the investors preference towards

investments on gold ETFs.  To know the market trends, which invokes

the customer to invest on gold ETFs?  To know the investor redemption rate on

gold ETFs  To know the investor risk taking ability in

Gold ETFs

INTRODUCTION ETFs are just what their name implies: baskets

of securities that are traded, like individual stocks, on an exchange. Unlike regular open-end mutual funds, ETFs can be bought and sold throughout the trading day like any stock.

Gold ETFs - Simply put, these are exchange traded mutual fund schemes that invest in physical gold. Also known as paper gold.

These schemes are a convenient and relatively less expensive alternative to owning physical gold. These schemes are designed to seek returns that closely correspond to the returns provided by investment in physical gold.

Gold ETFs provided investors a means of participating in the gold bullion market . Gold ETFs would be a passive investment; so, when gold prices move up, the ETF appreciates and when gold prices move down, the ETF loses value. Gold ETF tracks the performance of Gold Bullion.

Each unit approximately equal to the price of 1 gram of Gold.

STRUCTURE OF GOLD ETF

WHY INVEST IN GOLD ETF Effective portfolio diversifier.

Gold’s appeal as an alternative investment option remains high investors hope to maximize returns and minimize risk. While many investors may believe that their portfolios are adequately diversified, they typically contain only three asset classes - stocks, bonds/fixed income instruments and cash.

To counter adverse movements in a particular asset or asset class, many investors now strive to achieve more effective diversification

in their portfolios by incorporating alternative investments such as commodities.

While gold has shown strong returns over recent years, its most valuable contribution to a portfolio lies in the fact that it is not correlated with most other assets. This is because the gold price is not driven by the same factors that drive the performance of other assets.

Demand for gold may continue to rise as investors diversify their portfolio with an asset that is not correlated with the equity markets. In the meltdown seen in 2008-09, gold was not correlated with the other assets and hence saved.

ADVANTAGES OF GOLD ETFS

Easy AccessibilityHedge against the riskHedge against inflationEasy LiquidityBacked up by physical Gold which have the purity of 995 parts per 1000 (99.5%) or higher; sourced from LBMA (London Bullion Market Association) approved refiners

RESEARCH METHODOLOGY AND DATA COLLECTION METHODS Primary data:We collected 100 samples from the investors of

various fund houses in Guntur. Secondary data:Internet poling in financial websites like

(investopedia,money control.com), customer satisfaction survey of various fund houses.

Quantitative Teqnique:Analysis of data is done by Chi square test.

ANALYSIS OF THE SURVEY DATA

We analyze the data by using bar charts and pie charts.

C:\Users\Hinduja\Desktop\Analysis of the survey data.docx

FINDINGS  

Most of the investors feeling that Gold ETFs are safest investment avenue because investors hope to maximize returns and minimize risk. While many investors may believe that their portfolios are adequately diversified, they typically contain only three asset classes - stocks, bonds/fixed income instruments and cash.

To counter adverse movements in a particular asset or asset class, many investors now strive to achieve more effective diversification in their portfolios by incorporating alternative investments such as commodities.

  While gold has shown strong returns over recent years, its most valuable

contribution to a portfolio lies in the fact that it is not correlated with most other assets. This is because the gold price is not driven by the same factors that drive the performance of other assets. Demand for gold may continue to rise as investors diversify their portfolio with an asset that is not correlated with the equity markets. In the meltdown seen in 2008-09, gold was not correlated with the other assets and hence saved.

  Investors are feeling that Gold ETFs as an Inflation Hedge .Gold is

renowned as a hedge against inflation – as inflation goes up, price of gold also tends to go up along with it. Gold preserves the purchasing power and even increases it gradually. Inflation adjusted gold prices have generated a positive rate of return in the last 7 years.

 

SUGGESTIONS Returns on GETFs is depends on demand supply conditions

of gold bullion market which changes variably so returns are uncertain some times. So investors are better to consider GETFS as an alternative investment.

Investing in Gold and Gold related securities depends on investors objective so,

If investor’s objective is an ornamental or marriage needs fulfilling then It is better to go for physical gold.

If investor’s objective is an investment objective for long term returns then It is better to go for GETFS, Because these are less risky over gold mining securities and Gold futures.

GETFS hedge against inflation and risk, also Gold has negative correlation with the dollar, investors are better to include Gold ad an alternative investment option in the form of GETFS to minimize the risk of portfolio.

GETFS are very much convenient investment avenue for small investors, as the unit value is less so, small investors can choose GETFS as it is backed up by physical gold.