Best gold mutual funds to consider investing in

Mutual funds that invest directly or indirectly in gold are termed as gold funds. The investment can either be in physical gold, or gold Exchange-Traded Funds (ETFs). Thus, investors can accumulate gold as an asset class instead of physically buying gold, through gold funds.

What is a gold mutual fund?

A mutual fund or Exchange Traded Fund (ETF) that invests in gold bullion or gold-producing companies is a gold mutual fund. It is ideal for investors with a conservative approach, looking for a long-term store of value and high returns conveniently. Here’s a breakdown of different types of gold funds in India:

Gold ETFs

These are basically open-ended investments based on the gold Exchange Traded Fund’s units. Since the underlying asset is physical gold, the market variations in gold prices influence the value. It takes away the hassles of holding or securing physical gold against theft. To invest in Gold ETFs, you require a demat account.

Gold mining funds

These gold mutual funds invest in companies involved in the business of gold mining. Therefore, your investment returns depend on the performance of these companies in the share market.

Gold fund of funds

Ideal for investors with no demat account, these funds invest in units of Gold ETFs to get returns. Investors can invest in these funds through SIPs.

Taxation on gold mutual funds in India

The taxability of gold mutual funds depends on the investment duration and capital gains.

  • Less than three years is considered a short-term investment and will attract tax depending upon your tax bracket.

  • More than three years becomes a long-term investment and will be taxed 20% with indexation.

Best gold mutual funds in India

Following are the recommended options for investment in gold:

  • Kotak Gold Fund
  • HDFC Gold Fund
  • SBI Gold Fund
  • Aditya Birla Sun Life Gold Fund
  • Nippon India Gold Savings Fund
  • HDFC Gold ETF
  • Kotak Gold ETF
  • Quantum Gold Fund ETF
  • ICICI Prudential Gold ETF
  • IDBI Gold ETF

Advantages of investing in gold funds

  • You can hold gold as an asset without buying it physically
  • You can invest as low as Rs. 500 in gold funds. For Gold ETFs, the minimum investment is usually the prevailing price of 1 gram of gold.
  • You can use it as a hedge against market volatility
  • You get to invest in precious metal digitally without opening a demat account
  • You can diversify your portfolio
  • You can liquidate it on short notice without much hassle
  • Your assets remain unaffected even when the currency is falling
  • You can hold them for longer than one year to reap capital gains and avoid wealth tax or securities transaction tax

Should you invest in gold mutual funds?

Investing in gold mutual funds might not offer exceptional returns consistently, but it could shield your money against market fluctuations. In addition, gold funds are an alternative to investing, buying, or storing physical gold.

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