Recently the Insurance Regulatory and Development Authority (Irda) is screening a proposal for the allocation of life insurance companies so as make investments in gold and exchange-traded funds, or ETFs.

This proposal includes the move which will provide greater extension to local insurers to have their investments in various asset classes. The intention is to provide them with different options to eliminate the risks.

The regulator is considering the two options as stated by a senior IRDA official. The official has said that they may allow insurance companies to invest in gold and equity ETFs with a limit of 5-10%. Moreover it is presenting various companies to make venture in ETFs of commodities and equities.

An exchange-traded fund is a type of investment fund which is traded on stock exchanges identical to stocks.

On the other hand, Gold ETFs deals straight forward in gold and so track its prices closely.  It excludes the worry of stocking up on physical gold. A creel of stocks such as S&P CNX Nifty or BSE Sensex is represented by Equity ETF. It shows the composition of an index.