Top Gold Mutual Funds to Invest in India 2024

For many investors, Gold usually is considered a haven for investments. When economic storms hit, like inflation or market turbulence, gold often shines as a safe port for your money. Its value may not be easily eroded. Whether it’s in the form of jewelry, coins, or bars, gold may have a universal appeal. Many may see it as a store of value, a hedge against uncertainty, and a reliable asset to have in your investment portfolio. Let’s understand more about the best gold mutual funds 2024 in India that can be good investment options.

What are Gold Mutual Funds?

Gold funds or Gold mutual funds is an investment fund that contains assets associated with gold. Gold-related assets include gold bars, stocks of gold mining companies, or gold ETFs. Gold Funds in India can operate a fund of fund structure, with the primary assets being physical gold. So, fluctuations in the price of physical gold can directly impact the value of gold mutual funds.

Top Gold Mutual Funds in India

To understand gold mutual funds better, you may consider reviewing the top rated gold mutual funds for investment in 2024.

Gold Mutual Fund Name	Returns (p.a)
SBI Gold Fund	+11.91%
Axis Gold Fund	+11.61%
HDFC Gold Fund	+11.10%
Invesco India Gold Fund	+11%
Kotak Gold Fund	+10.96%
ICICI Prudential Regular Gold Savings (FOF)	+10.87%
Quantum Gold Savings Fund	+10.87%
Nippon India Gold Savings Fund	+10.86%
Aditya Birla Sun Life Gold Fund	+10.82%

Disclaimer: Please note that the above list is for educational purposes only, and is not recommendatory. Please do your own research or consult your financial advisor before investing.

Note: The data is from 25th January, 2024. However, for real-time updates on stock prices and market trends, visit smallcase stocks collection today!

Features of Gold Equity Funds

Here are the features of the best gold mutual fund.

• Indirect Exposure to Gold: Gold equity funds invest in gold mining and exploration companies, which gives investors indirect exposure to gold. This means that investors can benefit from rising gold prices without having to buy and store physical gold.

• Leverage: Gold equity funds can provide investors with leverage, which means that they can amplify their gains if gold prices rise. However, it also means that they can amplify their losses if gold prices fall.

• Liquidity: Gold equity funds are traded on the stock exchange, which can make them more liquid than physical gold. This means that investors can buy and sell their shares quickly and easily.

• Professional Management: Gold equity funds are managed by professional fund managers who have the expertise and experience to select the right stocks for the fund’s portfolio.

How do Gold Mutual Funds Work?

Gold funds are mutual funds that primarily invest in units of a Gold Exchange Traded Fund (ETF). Their main goal is to harness the potential of gold as a commodity for wealth creation. They can be well-suited for investors seeking exposure to gold without the need to physically own and manage the precious metal. With gold funds, you can enjoy similar benefits to owning physical gold, coupled with the expertise of professional fund management.

Each gold fund is managed by a fund manager who makes investment decisions in line with the fund’s objectives. The returns of a gold fund can closely mirror those of a gold ETF, and the Net Asset Value (NAV) of the fund can be influenced by the overall price movements of gold in the market.

Factors to Consider Before Investing in Gold MFs

Here are some factors to consider before investing in gold mutual funds (MFs):

• Investment Goals and Risk Appetite: Gold MFs can be typically considered to be medium-risk investments. Make sure that your investment goals and risk appetite are aligned before investing.

• Investment Horizon: Gold MFs are usually best suited for long-term investors (at least 5 years). This is because gold prices can be volatile in the short term, but they have tended to generate positive returns over the long term.

• Expense Ratio: The expense ratio is the annual fee that is charged to manage the fund. Lower expense ratios may lead to good returns for investors.

• Fund Manager’s Track Record: The fund manager plays an important role in the performance of a mutual fund. 

• Fund’s Investment Strategy: The best gold mutual funds can have different investment strategies. Some funds may focus on investing in gold mining and exploration companies, while others may focus on investing in companies that use gold in their products or services. 

How are Gold Funds Different from Gold ETFs?

Gold Funds and Gold ETFs are both investment options for gaining exposure to gold, but they have some key differences. Let’s have a look at it.

Feature	Gold Fund	Gold ETF
Investment type	Mutual fund	Exchange-traded fund (ETF)
Structure	Open-ended	Close-ended
Tracking	Tracks the price of gold	Tracks the price of gold
Expense ratio	Higher	Lower
Liquidity	Less liquid	More liquid
Investment horizon	Long-term	Short-term or long-term
Tax implications	Capital gains tax	Capital gains tax
Minimum investment amount	Usually low	Usually high
Suitability	Investors who might be looking for a diversified investment and are comfortable with market volatility	Investors who might be looking for a low-cost and liquid investment that tracks the price of gold

Who Can Invest in Gold Based Mutual Funds?

Gold-based mutual funds can be a good investment option for a variety of investors, including:

• Those who are looking to diversify their portfolio: Gold is a non-correlated asset class, which means that it may not move in line with other asset classes, such as stocks and bonds. This can help to reduce your overall risk.

• Investors who are concerned about inflation: Gold can be seen as a hedge against inflation because the price of gold can rise when inflation is high.

• Investors who are new to investing: Gold-based mutual funds may offer relatively simple and easy ways to invest in gold.

How to Select Top Rated Gold Mutual Funds to Invest in?

For selecting top-rated gold mutual funds to invest in, you can consider the following factors:

• Performance: It is advisable to look for funds with a consistent track record of outperforming their benchmark index and other gold MFs over the long term (at least 5 years).

• Fund Manager: You may look for funds with experienced and qualified fund managers.

• Investment Strategy: Make sure that the fund’s investment strategy is aligned with your own investment goals and risk tolerance.

• Portfolio Concentration: You can avoid funds that are too concentrated in a few sectors or stocks, as this will increase your risk, this is why you should do portfolio diversification.

How to Invest in Gold MFs?

To invest in gold MFs, you can follow these steps:

• Open a Demat and Trading Account: This can be done with a stockbroker or online investment platform.

• Choose a Gold Mutual Fund: You can use a variety of resources to research gold mutual funds. However, it’s important to do your own research and/or consult a financial advisor before investing.

• Invest in the Fund: You can make a lump sum investment or opt for a systematic investment plan (SIP) to spread your investment over regular intervals, like monthly or quarterly.

• Monitor your Investment: It is important to monitor your investment regularly to ensure that it is performing in line with your expectations. 

How are Gold Fund Returns Calculated?

Gold fund returns can be calculated based on the performance of the underlying assets held by the fund, which are primarily gold-related investments. The primary factors that influence the returns of a gold fund may include the price movements of gold bullion and the performance of gold mining stocks.

However, the most straightforward way to calculate gold fund returns is usually by comparing the fund’s net asset value (NAV) at the beginning of a specific period to its NAV at the end of that period. This change in NAV can represent the fund’s return over that time frame.

Tax on Gold Mutual Funds

The taxation of gold mutual funds in India can be quite similar to gold jewelry. The tax implications depend on the duration of your investment. If you wish to hold the investment for less than three years, it can be considered a short-term investment. 

For investments held longer than three years, the returns can be categorized as long-term investments, This may be subjected to a 20% tax rate along with indexation norms. Additionally, you may be required to pay CESS on top of other applicable taxes.

It’s worth noting that any capital gains from long-term investments in gold ETFs can be tax-exempted.

Benefits of Investing in Gold Mutual Funds

Gold mutual funds in India can offer several advantages that make them a good investment option.

• Minimal Storage Costs: Unlike physical gold, which requires secure storage in vaults or lockers, gold fund investments can be securely stored digitally in your investment account or Demat account. 

• Low Cost of Acquisition: When you buy physical gold, you may typically face various charges beyond the actual cost of gold, such as making charges for jewelry, customs duty, and GST. These additional charges may not apply to gold funds. 

• Liquidity: Units of gold funds can be easily purchased and redeemed from the Asset Management Company (AMC) or via the stock market, potentially providing greater flexibility and liquidity.

• Eliminates Purity Concerns: Gold mutual funds can mitigate this issue because the Asset Management Company (AMC) ensures the purity of the gold used as security for issuing Gold Fund units to investors. This assurance can make gold mutual funds a convenient and hassle-free option.

Risks Involved While Investing in Gold Mutual Funds

Here are some of the risks associated with gold MFs:

• Price Volatility: The price of gold can be highly volatile, influenced by various factors such as economic conditions, geopolitical events, and currency movements. 

• Market Risk: Gold MFs might be subjected to market risk. So, if the overall stock market or economy experiences a downturn, it can negatively impact the performance of these funds. 

• Regulatory and Tax Changes: Changes in government regulations or tax policies can affect the performance and taxation of your gold mutual fund. 

• Inflation Risk: While gold is often seen as a hedge against inflation, it  may not guarantee protection against all forms of economic instability or inflation. 

However, it’s advisable to assess your investment objectives, risk tolerance, and time horizon before considering an investment in gold MFs. Also, it’s important to do your own research and/or consult a financial advisor before investing.

To Wrap It Up…

In conclusion, gold mutual funds can be a part of a diversified investment portfolio for those who are interested in gaining exposure to the precious metal without physically owning it. However, it’s essential to approach such investments with a clear understanding of the associated risks. As always, please do your own research and/or consult a financial advisor before investing.

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