Gold Funds

Consider directing your money to gold funds as a way to establish a position in gold as an asset class while avoiding direct physical gold purchases. These funds direct investments into Gold ETFs, which has the extra benefit of avoiding storage costs, safety concerns, and liquidity difficulties with actual gold.

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Diversification of portfolio

Diversification of portfolio

No need for a demat account

No need for a demat account

Can outperform Gold ETFs

Can outperform Gold ETFs

Can choose between SIP or lumpsum

Can choose between SIP or lumpsum

What Are Gold Fund?

Gold funds are mutual funds which invest in gold-related assets such as gold ETFs and stocks of gold mining and distributing companies. Investing in gold funds gives you exposure to the gold industry without possessing gold. Unlike gold ETFs, you don’t need a demat account to invest in it. You can choose between a lump sum investment or a Systematic Investment Plan (SIP).

List of Best Gold Mutual Funds Based on Last 3-Year Returns

Gold Mutual Funds SIP Calculator
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Advantages of Investing in Gold Fund

Gold mutual funds give you broad exposure to the gold industry. Here are some of the advantages of investing in gold funds.

  • Convenience

    Unlike physical gold, which requires secure storage and insurance, the investors of gold funds need not be concerned about the security of their holdings. This simplicity makes gold ETFs an appealing alternative for individuals looking to gain exposure to gold without the logistical obstacles.

  • Safety and Transparency

    SEBI regulates gold mutual funds in India. Gold fund pricing is dependent on the current market value of gold. This transparency guarantees that investors get fair and accurate prices for their assets. Additionally, it enables investors to readily track the success of their gold assets.

  • Diversity

    Investing in gold funds allows investors to diversify their financial portfolios. Gold frequently acts differently than equities and bonds, acting as a buffer against market volatility. This diversity can assist to mitigate overall investment risk.

  • Cost Efficiency

    Investing in gold ETFs is frequently more cost-effective than acquiring actual gold. In comparison to purchasing and holding real gold, gold funds often offer cheaper transaction and maintenance fees. This cost-effectiveness improves total returns for investors.

  • Liquidity

    Gold funds are highly liquid, allowing investors to readily acquire and sell their holdings. This is especially useful during periods of market volatility, when rapid choices may be required. Investors can convert their gold fund units into cash without encountering the difficulties connected with real gold.

  • Tax Benefits

    Depending on the jurisdiction, various gold funds may provide tax advantages. Investors should look into the tax consequences of gold ETFs in their respective jurisdiction. Some countries may offer tax breaks for gold investments, increasing the overall appeal of gold funds.

Who Should Invest in Gold Funds?

Let us consider the sort of investors who would benefit from investing in gold funds.

  • Investors Looking for Diversity

    Diversification of a portfolio is important to protect it from market risks. If most of your investment is in equities, then you can consider investing in gold funds. It can save you during a market downturn.

  • Those Who Want to Buy Gold

    Investors often want to buy gold but don’t want to bear a large expense. In such a case, you can enjoy the benefits of having gold by investing in a gold fund. It is a much cheaper alternative to buying gold.

  • Investors Seeking Liquidity

    Unlike gold, it is much easier to convert returns from gold funds into cash. This makes it a safe option which can be redeemed during times of emergency.

Points to Consider before Investing in Gold Funds

The following are some points that you should consider before investing in mutual funds:

  • Financial Goals

    You should consider what and how much you want to achieve from your investment. Your investment horizon will also play a key role in making an investment decision.

  • Investment Cost

    The expense ratio and the exit load are the costs which you must consider while investing in gold funds.

  • Diversification of Portfolio

    If you want to diversify your portfolio and hedge yourself against market volatility, then investing in gold funds can be a good choice.

  • Taxation

    Short or long-term capital gains tax will be charged on your returns depending on how long you stay invested. Your tax slab rate will be applicable in case of short-term capital gains tax. In the case of long-term capital gains tax, 20% will be charged.

  • Past Performance

    You should track the past performance of different gold funds to check which option is the best investment option for you.

  • Fund Manager’s Track Record

    The track record of the fund manager will tell you whether the gold fund is in the right hands.

Limitations of Gold Funds

Let us take a look at some of the drawbacks of gold funds.

  • Gold Funds vs Golf ETFs

    Gold ETFs have a lower expense ratio and higher liquidity compared to gold funds. Holding gold ETFs is practically almost the same as holding gold itself.

  • Market Risk

    The returns from gold funds can be affected by market price distortions. For example, a geopolitical event could drastically alter the returns from a gold fund.

  • Lesser Returns than Equity

    Gold funds don’t generate returns as high as those of equity mutual funds. Over the long term, other mutual funds can give better returns than gold funds.

How to Start Investing in Gold Funds with INDmoney

INDmoney is here to help you through your investment journey. Here’s how to invest in best gold mutual funds with INDmoney.

  • Step 1

    Download the INDmoney app and create your free investment account by completing your KYC ( Know Your Customer).

  • Step 2

    Once your Free investment account is ready, you can either search for Gold Funds or go to the mutual fund section and tap on Gold Funds from the Collections Section. 

  • Step 3

    Choose a Gold Fund by looking at aspects like past returns, volatility, downside capture ratio, AUMExpense ratios and underlying stocks and sectors.

  • Step 4

    You can choose to set up SIP in GoldFunds or even invest as lumpSum. Once you are on the individual Gold Funds page click from the bottom “One-time” for lump sum investment or “SIP” for systematic investment plan. 

  • Step 5

    Choose the amount that you want to invest as SIP or LumpSum.

  • Step 6

    Set up payments. If you choose to set up SIP in Gold Funds,  you can do a free automatic pay set up via bank mandate or UPI. If you choose to invest in lumpsum (one-time) then you can pay via UPI, netbanking, NEFT or RTGS.

Should You Choose Gold Funds?

If you want to diversify your portfolio and protect yourself from inflation, investing in gold funds could be a good choice. It can offer higher returns than gold ETFs. With INDmoney, you can simplify your investment journey by choosing from the best gold funds.

Frequently Asked Questions

You can invest in a gold fund based on its expense ratio, exit load, your investment horizon and desire to diversify your portfolio.

Depending on your objective, you can invest in a gold fund for a short or long duration.

They invest in gold ETFs and stocks of gold mining companies.

Gold has traditionally been regarded as a safe investment. So if you don’t want to take too many risks, you can invest in good gold funds.

Yes, you can start an SIP to invest in a gold fund.

Some of the factors you should consider while investing in gold funds are:

  • Taxation
  • Diversification of portfolio
  • Expense ratio
  • Exit load
  • Experience of the fund manager
  • Gold fund’s previous performance

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