ETF NFO: Wait to buy ETF in open market after listing: Finance Trading Times

ETF NFO: Wait to buy ETF in open market after listing

As per the news on certain financial websites, Investing in gold ETFs appears to be costlier during the new fund offer (NFO) period. ETF-NFO-Gold-Investments
For example, the Gold Benchmark Exchange Traded Scheme, which was launched in February 2007, charged an entry load of 1.5 per cent and UTI Gold Exchange Traded Fund, launched in March 2007, charged 2.5 per cent. Investors can look for opportunities in these funds when they are listed on the stock exchanges for open trading to avoid the entry load in the NFO period.

Although investors are not required to pay an entry load while investing in listed gold ETFs, they have to pay a brokerage fee. Brokerage charges are similar to what is charged while investing in stocks — around 0.5 per cent of the transaction value. However, the charge varies from one broker to another.

A pre-requisite for investing in gold ETF is to have a demat and trading account with a broker. To maintain these accounts, investors have to pay annual charges. There is also the expense ratio, a recurring expense, attached with the fund. Both Gold BeES and UTI Gold ETF have an annual expense ratio of 1 per cent.

Related: Quantum Gold based ETF, Investing in Gold?, Example of ETF with calculations & AIG Gold Fund Review

The annual expenses such as storage, insurance, and management fees are charged by selling a small amount of gold represented by a certificate. The amount of gold in each certificate will gradually decline over time. Investors need to consider these charges before investing.
Hence, it would be advisable to wait for the NFO period for Gold based ETF to be over and then buy the shares of Gold ETF in the open markets. Table of Contents
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