I am planning to put 1 lakh in gold etf . How much returns I will get after 1 year...

Ans: You are planning to invest Rs. 1 lakh in a Gold ETF. You want to know how much return you will get after one year.

Let us look at this from a 360-degree angle. We will analyse risk, return, taxation, and better alternatives for your investment.

Understanding What a Gold ETF Means
A Gold ETF is a mutual fund.

It tracks domestic gold prices.

Each unit represents physical gold.

There is no delivery of gold.

You can buy and sell it like shares.

Gold ETFs are paper form of gold. There is no locker or insurance needed.

Can You Predict Returns from Gold ETF?
No one can predict exact return in one year. Gold is not a fixed return asset. It is not like FD or PPF.

Gold returns depend on:

International gold prices

Dollar–Rupee exchange rate

Global inflation and recession fears

Interest rates in US and India

Geo-political tension and wars

So, gold is influenced by external and unpredictable events.

Historical Return of Gold – But No Guarantee
Let us understand the recent pattern.

In some years, gold gave 25% returns.

In some years, it gave 1% or even negative return.

Over 5–10 years, average return is 7–9% per year.

But 1-year return can be very random.

Your return after 1 year may be:

Less than 5% if gold stays flat.

Zero if gold corrects.

10%+ only if global risk increases.

So, don’t expect a fixed return. Gold is not for short term.

Should You Invest Rs. 1 Lakh in Gold ETF?
Gold is useful for diversification. But not as the main investment.

At most, 5% to 10% of your total portfolio can be in gold. More than that is risky.

Gold does not:

Pay interest

Create dividends

Give bonus or rights

Beat equity in long term

Gold only protects purchasing power. It does not build wealth fast.

Risks of Investing in Gold ETFs for Short Term
Gold may fall due to strong rupee.

US Fed may hike interest rates.

There may be no global tension.

Equity markets may attract more money.

Gold may underperform for long time.

So, 1-year view is not suitable. Gold is for 5+ years.

Tax Rules for Gold ETFs
Gold ETFs are treated like debt mutual funds.

If you sell before 3 years:

Gains are added to your income.

Taxed as per your slab.

If you sell after 3 years:

Gains are also taxed as per slab.

No indexation benefit now (new rule).

So, you may pay more tax on gold ETFs than equity MFs.

Why Mutual Funds Are Better Than Gold ETFs
You should think about this:

Equity MFs are better for wealth creation.

Hybrid funds give safety and return balance.

SIP in MFs builds long-term corpus.

Gold ETFs only protect value, don’t grow money.

Gold ETF is for capital preservation. MF is for wealth growth.

Should You Still Invest Rs. 1 Lakh in Gold ETF?
Only if:

You have no gold exposure in your portfolio.

You already have enough in equity and debt.

You want to diversify 5–10% of assets.

You don’t plan to exit in 1 year.

Don’t invest full Rs. 1 lakh in one go. Spread in 2–3 parts.

But if you are investing only for 1 year, then avoid gold ETFs.

What You Should Do Instead
Invest Rs. 1 lakh in a balanced mutual fund.

Use SIP or STP if you want to spread risk.

Choose regular plans with MFD-CFP.

Avoid direct plans if you are not experienced.

Avoid index funds. They copy market blindly.

Use mutual funds to build a strong base.

This gives better long-term outcome than gold ETFs.

Avoid Index Funds – Understand the Drawback
If you are thinking of passive funds like gold ETF or index funds:

Understand this clearly:

They don’t have fund manager intelligence.

They copy market movements.

They fall fully during crash.

They can’t protect from poor companies.

Instead, actively managed mutual funds:

Have strategy

Are rebalanced regularly

Give better downside protection

Suit risk profiles better

So avoid index funds and gold ETFs for building core wealth.

Avoid Direct Funds – Get Expert Help
If you invest in gold ETFs or mutual funds through direct plans:

Please note:

You will not get support during correction.

You may exit at the wrong time.

There is no one to guide your allocation.

You may overexpose to one asset.

Instead, use regular funds via MFD + CFP:

Personalised allocation

Behavioural coaching

Review and rebalancing

Goal-based planning

This helps you create better wealth over time.

Ideal Portfolio Allocation for You
Keep this as thumb rule:

60–70% in equity mutual funds

20–30% in fixed income (PPF, debt MFs)

5–10% in gold (including ETF or SGB)

5–10% in NPS or retirement corpus

This builds safety and growth together.

If You Still Want to Invest in Gold ETF
Then:

Limit exposure to 5–10% of your total investments.

Invest only for diversification.

Don’t expect high return in 1 year.

Review after 2–3 years minimum.

Rebalance if gold value increases too much.

Don’t increase gold allocation further.

Do not make gold your main investment. It should play only a support role.

Finally
Gold ETF is not a bad product. But it is not a wealth builder. Don’t expect high return in 1 year. Don’t put your full Rs. 1 lakh for just short-term parking.

If your goal is wealth creation, equity mutual funds are better. If your goal is stability, hybrid funds are better. If you want safety, debt funds or PPF are better.

Gold is like a seatbelt. It keeps you safe, but it doesn’t move the car forward.

So, use gold wisely, in small proportion, and only for portfolio balance.

Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment