Best Gold Mutual Funds To Invest In India
Gold is all the rage these days. As the price of gold increases, even new-age investors are finding it to be a worthwhile investment.
While our parents were obsessed with physical gold, millennials, and Gen Z have more options when it comes to buying gold, such as Digital Gold, Gold ETFs, Gold Mutual Funds, Sovereign Gold Bonds, and more.
In this blog, we will be talking about gold mutual funds, how they work, their benefits, and the best gold mutual funds you can invest in India now.
According to a recent consumer data report by AxisMyIndia, gold is currently the most favored investment category among Indians.
The report showed that digital gold emerged as a favorable investment option in Tier 1 and Tier 2 cities. An India Investment Behaviour Study found that a total of 65% of Indians invest a part of their income in one form or another and gold emerged to be a popular choice of investment.
The study revealed that 53% preferred gold as an investment tool while 35% of the population showed awareness towards digital gold.
Physical gold takes a lot of money to buy, and you have to pay the making charges, as well as, find a secure place to store it. On the other hand, you can start investing in digital gold for just ₹100 and you don’t have to pay the making charges, and also, not worry about storing the gold.
Apart from digital gold, gold ETFs, sovereign gold bonds, gold mutual funds, and gold derivatives are some of the ways in which you can invest in non-physical gold.
(We’ve also written a blog on why gold prices are increasing and what the future looks like for the price of gold)
In this blog, we will be discussing what gold mutual funds are, how they work, who are they suitable for, and their benefits. We will also give you a list of the ten best gold mutual funds so that you can start your investing journey with Koshex.
What Are Gold Mutual Funds?
They are open-ended mutual fund schemes directly or indirectly invest in gold reserves. Usually, the AMC (Asset Management Company) invests in stocks of gold-producing or distributing syndicates, stocks of mining companies, and physical gold.
In India, gold mutual funds primarily invest in gold Exchange Traded Funds (ETFs). As the underlying asset is held in the form of physical gold, its value is directly dependent on the price of the yellow metal. Gold ETFs are listed on major stock exchanges just like equity shares.
How Do Gold Mutual Funds Work?
When an investor invests in these mutual funds, the AMCs will use the money to purchase units of gold ETFs, which in turn will invest in physical gold. After this, the fund house will allocate units to investors proportional to their investments in the scheme.
Since the underlying asset of gold ETFs is physical gold, the value of the gold mutual fund units depends on the price of the commodity. The value of the fund rises with a jump in the price of gold and falls with a decline in the price of gold.
Investors can purchase and sell shares of the gold funds on an exchange and the current value of the underlying gold investment determines the share price. Returns from these funds may exceed the yellow metal’s price.
Who Should Invest In Gold Mutual Funds?
Gold mutual funds are suitable for people who wish to diversify their portfolios and reduce the risk of their investments. The fund invests in gold bullion and gold is mostly independent of fluctuating financial markets. This means when the market declines, people buy gold as they view it as a safe-haven asset. Hence, gold is ideal for risk-averse investors as well.
Gold mutual funds are also perfect for investors, who are looking to save on taxes. TDS (Tax Deducted at Source) is not applicable to these types of investments. Only the taxes applicable to buying and selling jewelry is applicable to these funds.
What Are The Benefits Of Investing In Gold Mutual Funds?
There are several benefits to investing in gold mutual funds. Let’s dive in and take a look at them.
Flexible Investment Amount
When you invest in gold mutual funds, you can choose the amount you wish to invest. You can invest as low as ₹500 while investing in a gold mutual fund. However, if you buy physical gold, you would have to pay a significantly high amount. Hence, gold mutual funds provide more flexibility to an investor.
Safe Option
When the stock markets decline, gold mutual fund investments tend to be safer. Hence, there is a possibility that you will earn better returns for your investment in these mutual fund schemes. The reason behind this is that gold prices tend to rise when the market is falling.
Diversify Portfolio
If you are looking to diversify your portfolio, you can consider investing in gold mutual funds. For example, if your portfolio has a lot of equity exposure, you can invest in funds, which can rise during a market crash. So, you can invest in gold mutual funds to diversify your investment portfolio. Apart from ensuring diversification, gold mutual funds also bring stability to the portfolio.
High Liquidity
Investments in gold mutual funds can be liquidated on short notice and without much hassle. You can redeem your investments from these funds during the market hours of any working day. You will get the money in your account within 2 to 3 business days once you have given the redemption request.
Completely Pure
When you buy physical gold, you may have concerns about its purity. However, when you invest in gold mutual funds, you are investing in units of gold funds. It is the responsibility of the AMC to make sure that the gold is pure. So, you don’t have to worry about the purity of the gold.
In The End…
Gold mutual funds are perfect for investors, who are looking to diversify their investment portfolio. They are also ideal for risk-averse investors, as well as, investors, who are looking to bring stability to their portfolios.
You can start investing in gold mutual funds for as low as ₹500 but if you wish to buy gold, you would need to spend thousands of rupees.
Also, it is easier to redeem your investments from gold mutual funds and get the money quickly. On the other hand, it might not be that easy to sell physical gold swiftly.
We hope you understood all about gold mutual funds, how they work, who should invest in them, and their benefits. We also hope that the list of ten best gold mutual funds helps you find the one that suits your financial needs.
If you wish to learn about other personal finance topics or investment instruments, you can check out our other blogs in our Blogs section or explore our Offerings section.
Also, you can create a free account with Koshex to track your net worth in real-time, save smartly, invest in personalized recommendations, build smart money habits, and more.
Check out Koshex today and take your financial game to the next level.
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