A Basics Guide for Indian Investors
Investing in a commodity ETF allows one to participate in the price movement of physical commodities such gold, silver, oil, and more without having to really purchase and keep them.
Among Indian investors looking to diversify their portfolio and lower risk, commodities ETFs are gradually gaining appeal.
An ETF for commodities?
A commodity ETF, often known as an Exchange Traded Fund, is a kind of mutual fund designed to follow the price of a particular good or set of commodities.
Investing in a commodities ETF can help you instead of purchasing actual gold or oil should the price of the commodity rise.
Just like shares, these ETFs are purchased and sold from stock markets.
Why should one buy a commodities ETF?
The following explains some of the reasons Indian investors are gravitating towards commodities ETFs:
- Diversification introduces to your portfolio a fresh asset class.
- Hedge Against Inflation: Many times, commodities do well with rising inflation.
- Liquidity: Simple stock market purchase and sell process.
- Low Cost: Unlike genuine gold, there is no need to concern storage or paying charges.
- Transparency: On the exchange, prices are exactly evident.
Commodity ETF varieties available in India
Although India currently has limited diversity, these are the primary forms of commodities ETFs accessible:
- ETFs for Gold
- Most often used in India
- Track the cost of actual gold.
- Simple method of gold investment without jewelry purchase
- Applied for long-term objectives include savings or marriages
- Most often used in India
- ETFs Made of Silver
- Reasonably fresh in India
- Track the cost of actual silver.
- Suitable for those wishing to vary from gold
- Reasonably fresh in India
- ETFs with multiple commodities—international
- Certain ETFs follow a basket of metals, natural gas, and commodities including oil.
- Usually advertised elsewhere, they might not be immediately available on Indian exchanges.
- Indian investors can get them via overseas mutual funds.
- Certain ETFs follow a basket of metals, natural gas, and commodities including oil.
Factors to Think Through Before Making Investments
- Price: Global events can cause significant movement in the pricing of commodities.
- Unlike FDs or bonds, there is not interest or dividend here.
- Tracking Error: The ETF might not perfectly reflect the price of the commodity.
- Gold and silver ETFs are handled for taxes as non-equity funds.
Investing in a Commodity ETF in India
- Opening a demat and trading account under recognized broker
- From a reputable fund house—such as SBI, HDFC, ICICI, etc.—pick a commodities ETF.
- Purchase units much like you would stocks.
- Track performance using either your trading app or mutual fund dashboard.
Final Thoughts
For Indian investors seeking exposure to commodities without handling actual storage or expensive fees, a commodity ETF is a straightforward and handy approach.
They may be a hedge against economic instability, are simple to trade, and provide diversity.
A commodities ETF is worth looking at if you want to give your assets another angle.