Summary
Investing in gold mutual funds in India offers various advantages, including diversification, cost-effectiveness, security, and systematic investments. Historically, gold has shown an inverse relationship with equities, making it a valuable buffer against market volatility. Gold funds eliminate making charges associated with physical gold investments, making them a cost-effective choice. These funds also simplify storage and security concerns. Systematic investments can be made in gold mutual funds, with a minimum investment requirement of INR 100. However, it is crucial to seek expert guidance before making investment decisions.
A gold mutual fund, as its name implies, allocates investments into different gold forms, whether that's physical gold or shares in gold mining companies. Gold funds that focus on physical gold provide investors with the advantage of acquiring pure gold at a lower cost. They are open-ended investment vehicles, which derive their value from units provided by the gold exchange traded fund (ETF). Since the underlying asset consists of physical gold, the fund's value is directly linked to the price of this precious metal. According to data released by the Association of Mutual Funds in India (AMFI), gold ETFs witnessed a substantial inflow of INR 1,028 crore in August 2023. This surge followed an inflow of INR 456 crore in the same segment in July. Quite clearly, the sector is booming.
Striking gold: Four powerful reasons to add them to your portfolio
There are many reasons to invest in gold mutual funds. Among the benefits they offer, diversification, cost-effectiveness, security, and the ease of systematic investments stand out as compelling factors.
- Mitigating risk with gold investment - Historically, gold has exhibited an inverse relationship with equities as an asset class. When you diversify your investment portfolio between equities and gold, you create a buffer against the inherent volatility of equity investments. When equity markets experience a decline, the demand for gold tends to rise. Conversely, if gold prices fall, equity markets often witness an upswing. This dynamic interplay between these two asset classes within your portfolio facilitates effective diversification.
- Eliminating making charges - Physical gold purchases, such as jewellery, often incur “making charges,” representing an additional transaction cost. Even when selling such jewellery later, a deduction equivalent to the making charges is typically applied. However, investing in gold funds eliminates this additional cost, as these funds invest in units of gold ETF.
- Simplified storage and cost management - Managing physical gold can be a concern, as it necessitates secure storage to prevent theft or loss. Many gold owners resort to renting lockers for added security, incurring additional costs. Gold funds offer a solution to these concerns by providing access to gold as an asset without the burden of storage management.
- Systematic and affordable investment - Investing in gold funds allows for systematic investments in fixed amounts at regular intervals. Each unit of the gold ETF scheme is equivalent to one gram of gold with a purity of 99.5%., making it a convenient option for investors. The minimum investment required for gold mutual funds is INR 100. So, you have the flexibility to invest small amounts and choose investment intervals, whether it's weekly, monthly, annually, or semi-annually, aligning with your financial preferences and convenience.
Unveiling the gold stars: Best gold mutual funds in India
Considering these advantages, let's explore the best mutual funds for gold in India. However, it is crucial to emphasise that this list is provided for reference purposes. Expert guidance is highly recommended before making any investment decisions.
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| Axis Gold Direct Plan-Growth | HDFC Gold Direct Plan Growth | Kotak Gold Fund Direct Growth | SBI Gold Direct Plan Growth |
| Current net asset value (NAV) or the company's total assets minus its total liabilities | As of October 30, 2023, the Axis Gold Fund's NAV for growth option in its regular plan is INR 18.39. | As of November 1, 2023, the HDFC Gold Fund - Direct Plan's NAV for growth option is INR 19.57. | As of November 1, 2023, the Kotak Gold Fund - Direct Plan's NAV for growth option is INR 25.32. | As of November 1, 2023, the SBI Gold Fund - Direct Plan's NAV for growth option is INR 19.11. |
| Returns or long-term gold mutual funds profit from rising gold prices | The returns for this fund over various time frames are 18.15% (1 year), 4.97% (3 years), 12.71% (5 years), and 5.14% (since it started). | The fund's returns stand at 19.09% (1 year), 5.24% (3 years), 12.9% (5 years), and 5.39% (since inception). | The fund's returns are 18.36% (1 year), 5.06% (3 years), 12.88% (5 years), and 5.41% (since its launch). | The fund's returns over various timeframes are 18.69% (1 year), 5.21% (3 years), 13.01% (5 years), and 5.42% (since commencement). |
| Fund size or the total market value of the assets being managed by the gold mutual fund | It holds assets under management (AUM) worth INR 327.93 crore, as of Sep 30, 2023. | The AUM of the fund as of September 30, 2023, is INR 1535.77 crore. | The fund's AUM as of September 30, 2023, is worth INR 1459.78 crore. | As of September 30, 2023, the fund’s AUM stands at INR 1361.33 crore. |
| Expense ratio (ER) as gold funds invest in gold ETFs, leading to their expense ratio encompassing the latter's costs | As of October 20, 2023, the ER of the fund’s regular plan stands at 0.5%. | The fund’s ER for its direct plan is 0.18%, as of October 22, 2023. | As of October 22, 2023, the ER of the fund’s direct plan is 0.15%. | The fund’s ER for its direct plan is 0.1%, as of October 22, 2023. |
| Minimum investment required | The minimum initial, additional, and minimum systematic investment plan (SIP) investment amount is INR 100. | The minimum initial, additional, and SIP investment required is INR 100. | The minimum initial, additional, and SIP investment required is INR 100. | The minimum initial investment required is INR 5000, with a minimum additional investment of INR 1000. The minimum SIP investment is INR 500. |
Maximising returns with the best gold mutual funds in India: Role of expert support
The gold mutual funds landscape in India is dynamic and requires domain knowledge. This can be a challenge for new investors in the space. This is where financial experts come into the picture. Leveraging their expertise and guidance, investors can optimise their portfolios, manage risks, and harness the potential of this precious metal. Invest right, invest now with experienced professionals. Use technical tools to maximise your returns. Invest in the best gold mutual funds to reach your financial goals with one of India’s fastest-growing trading platforms.
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