Putting money in gold is a timeless tradition in India, but buying the jewellery or coins can have some concerns like safety, purity, and high making charges that can reduce your profits. What if you could get all the benefits of owning gold in a smarter, simpler, and digital way.
This is where we see the Gold Mutual Funds in the picture, by investing in gold mutual funds, you can invest in gold digitally. These funds are the modern way to invest in gold, where the investors can own pure 24-karat gold on their phone or computer, without ever needing a locker. These mutual funds can be perfect for beginners and smart investors who want the safety of gold without the old-school hassles.
In this blog we will understand what a gold mutual fund is. Also, this blog will explain to you how gold funds work, why starting a gold SIP is a great idea, and list some of the best gold mutual fund options available in India today.
Understanding Gold Mutual Funds
How Gold Mutual Funds Work
A gold mutual fund takes money from investors and then collectively invests in gold, here a fund manager manages the investment and gold on behalf of the investors. By investing in gold like this you can actually buy real gold without the hassle to store the gold.
In India gold mutual funds work as a ‘Fund of Funds’ (FoF) meaning:
- You invest your money in a gold mutual fund.
- The fund manager collects money from all investors like you.
- They use this money to buy units of a Gold ETF (Exchange Traded Fund).
- This Gold ETF holds real, 99.5% pure physical gold in very secure vaults.
By investing using this method you get pure gold and the value of your investments move up or down depending upon the price of gold in the market.
Read Also: Best Gold ETFs in India
Top 10 Gold Mutual Funds in India
| Fund Name (Direct Plan – Growth) | AUM (Rs.Cr) | Expense Ratio (%) | 1-Year Return (%) | 3-Year Return (% p.a.) | 5-Year Return (% p.a.) | Minimum SIP Amount (Rs.) |
|---|---|---|---|---|---|---|
| Nippon India Gold Savings Fund | 4131 | 0.13 | 53.5 | 33.2 | 17.7 | 100 |
| HDFC Gold Fund | 6,329 | 0.18 | 54.3 | 33.3 | 18.01 | 100 |
| SBI Gold Fund | 7,033 | 0.10 | 53.7 | 33.3 | 18.03 | 500 |
| Axis Gold Fund | 1,557 | 0.17 | 53.0 | 33.04 | 17.94 | 100 |
| Kotak Gold Fund | 4153 | 0.16 | 53.75 | 33.18 | 17.9 | 100 |
| ICICI Prudential Regular Gold Savings Fund | 3,305 | 0.09 | 53.07 | 33.03 | 17.85 | 100 |
| Aditya Birla Sun Life Gold Fund | 909 | 0.20 | 53.55 | 33.50 | 18.08 | 100 |
| DSP Gold Fund | 194 | 0.66 | 52.47 | N/A | N/A | 100 |
| Invesco India Gold Fund | 244 | 0.10 | 51.85 | 32.84 | 17.75 | 500 |
| Quantum Gold Fund | 300 | 0.04 | 53.96 | 33.50 | 17.90 | 500 |
1. Nippon India Gold Savings Fund
This is the biggest gold fund in India and is also one of the oldest funds in India. Nippon gold fund gives customer returns that are closely matched to the performance of its underlying ETF, the Nippon India ETF Gold BeES.
2. HDFC Gold Fund
This is considered to be one of the most trusted fund houses of India, this fund invests in units of the HDFC Gold ETF. If you are looking for a reliable fund for your gold investments, this is the most popular choice.
3. SBI Gold Fund
This is the largest AUM in the gold funds category, which is backed by India’s most trusted bank, State Bank of India. This gold fund provides returns that correspond to the SBI Gold ETF.
4. Axis Gold Fund
Here, the fund invests in the Axis Gold ETF that copies the performance of physical gold. It allows investors to start investing in small SIP amounts.
5. Kotak Gold Fund
In this gold fund the returns are generated by investing in units of Kotak Gold ETF. This also acts as a diversified fund that combines gold and silver together to give broader precious metal exposure to the investors.
6. ICICI Prudential Regular Gold Savings Fund
This fund has the lowest expense ratio in this category and the fund generated its returns by investing in ICICI Prudential Gold ETF, making it cost-effective for the new investors.
7. Aditya Birla Sun Life Gold Fund
Here the returns are tracked based on the performance of Aditya Birla Sun Life Gold ETF, which offers another solid option from a well-known fund house.
8. DSP Gold Fund
Here the investment is done by investing in units of DSP Gold ETF and the returns are generated by this. For investors it is a simple way to invest in gold and diversify your portfolio.
9. Invesco India Gold Fund
In this gold fund the performance of Invesco India Gold ETF is tracked to get returns, it has a straightforward option for investors seeking to track gold prices.
10. Quantum Gold Fund
This fund invests in units of the Quantum Gold ETF and also has one of the lowest expense ratio compared to others which helps in cutting down the cost of investing and making increased profits.
Now that we have gone through some of the Top Gold Funds in India you might be thinking how can you invest in these gold mutual funds but platforms like Pocketful make this extremely simple for the investors as they can search for different gold mutual funds, complete their KYC digitally and start investing in different gold SIPs or even invest a lump sum amount. Pocketful gives a user-friendly interface to its users making investing in gold much easier.
Read Also: Best Gold Stocks in India
Benefits of Investing in Gold Mutual Funds
1. Simple & Secure Investment
By investing in these gold mutual funds investors don’t need to take on the headache of storing the gold safely. Here the fund house takes care of storing the gold in highly secured vaults; investments are stored in a digital format safely, making them safe from theft.
2. Diversified Portfolio
Gold mutual fund investments can help the investors in diversifying their portfolio. During the stress period, when the stock market might perform poorly, these gold investments can help in stabilizing one’s portfolio. This helps in protecting your overall portfolio during uncertain times.
3. Protection from Inflation and Market Volatility
It saves the investors from the inflation, as during inflation the price of commodities goes up and the value of money goes down. Gold has acted as an asset that has been guarded during inflation times. It is witnessed that when the currency depreciates during inflation, the price of gold rises helping the investor protect their wealth.
4. High Liquidity and Convenience
If you require cash instantly, selling the physical gold can be a challenge in terms of buyers, current price of the gold and even the making charges as you may not get the fair price. But buying these gold mutual funds can sell your units on any business day and get the money directly in your bank account within a few days. The process is transparent and hassle-free.
Factors to Consider Before Investing
- Fund Performance History: Investors shall look for how funds have performed over the last 1, 3, and 5 years, as it helps in showing you how consistently it has tracked the price of gold. Though the previous performance doesn’t predict the future, it helps the investors in tracking the record of the fund.
- Expense Ratio: Think of it as a service charge that is levied annually by the fund manager to manage your investments. A small difference in the expense ratio can affect the investor’s profit, so one should always look for the expense ratio and prefer a lower ratio.
- Asset Under Management (AUM): This is a collective total amount that all the investors have put into the specified fund, here a large AUM shows the trust of investors. A good AUM also means that the fund has liquidity meaning you can easily buy or sell the units.
- Tracking Error: This helps in telling the investors if the fund is working properly or not as this is used to track the performance of gold price in the actual market. Investors shall look for lower tracking error as this means that the return on your investment is very close to the actual gold returns.
- Fund Manager’s Experience: While most gold funds are passively managed (they just follow the underlying ETF), it’s good to invest with a fund house that has a long history and trusted reputation in the industry. This adds a layer of reliability to your investment.
Read Also: Gold ETF vs Gold Mutual Fund: Differences and Similarities
Conclusion
Investing in gold has changed for the better. You no longer need a large sum of money or a bank locker to own this precious metal. Gold mutual funds offer a simple, affordable, and smart way to add the stability of gold to your investment portfolio.
One should think of them as a long-term investment that protects your wealth, fights with rising inflation and brings diversification to your portfolio. You should be clear about the future goals that you want to meet and make the decision accordingly.
Frequently Asked Questions (FAQs)
What is the main difference between a Gold Fund and a Gold ETF?
To buy or invest in a gold ETF you need to have a Demat account but to invest in Gold Funds (which are funds of funds) you can directly do it from your bank account and there is no requirement for a Demat account.
Do Investors need a Demat account to start a Gold SIP?
No, to invest in Gold SIP you don’t require a demat account you can start a Gold SIP with just your bank account after completing your KYC.
How are Gold Mutual Funds taxed?
Gold mutual funds are taxed like non-equity or debt funds, if the units are sold within 3 years then the profit is added to your income and taxed according to your tax slab.
What is the minimum amount I can invest?
Most gold mutual funds allow you to start a SIP with as little as Rs.100 or Rs.500 per month, making gold investing accessible for everyone.
Shall I invest a lump sum amount or start a SIP in a Gold Fund?
SIP (Systematic Investment plan) helps in investing a fixed amount regularly whereas a lump sum is a one-time investment that you can consider if you have a large amount of money ready, so look according to the funds availability and your future goals.
