Top Gold Mutual Funds to Invest in India 2024
Investing in gold mutual funds offers investors a unique avenue to participate in the potential benefits of gold as an asset class without the need for physical ownership. These funds pool investor money to invest in standard gold bullion, providing a convenient and liquid way to access the precious metal’s performance. Whether as a hedge against economic uncertainty, inflation, or simply diversifying a portfolio, gold mutual funds cater to a range of investment goals with their historical resilience and potential for capital preservation. Hence, in this article, let’s look at top gold mutual funds in India, how to invest in them, benefits, risks, and more.
Top Gold Mutual Funds in India
To understand gold mutual funds better, you can consider reviewing the top rated gold mutual funds for investment in 2024.
| Name | AUM (in Cr.) | CAGR 3Y (%) | Expense Ratio (%) | CAGR 5Y (%) |
|---|---|---|---|---|
| LIC MF Gold ETF FoF | 71.29 | 14.50 | 0.25 | 13.70 |
| Axis Gold Fund | 699.09 | 14.14 | 0.17 | 13.69 |
| Invesco India Gold ETF FoF | 83.93 | 14.37 | 0.1 | 13.66 |
| HDFC Gold ETF FoF | 2,496.22 | 13.90 | 0.18 | 13.56 |
| SBI Gold | 2,522.00 | 13.97 | 0.1 | 13.49 |
| Kotak Gold Fund | 2,304.87 | 13.53 | 0.16 | 13.46 |
| Nippon India Gold Savings Fund | 2,237.03 | 13.71 | 0.14 | 13.38 |
| Aditya Birla SL Gold Fund | 439.52 | 13.46 | 0.15 | 13.36 |
| ICICI Pru Regular Gold Savings Fund | 1,325.21 | 13.89 | 0.09 | 13.32 |
| Quantum Gold Saving Fund | 145.67 | 13.80 | 0.06 | 13.30 |
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 on the top 10 gold mutual funds in India list is from 19th November 2024 and the data is derived from Tickertape Mutual Fund Screener.
Filters Used:
- Category: FoFs – Gold
- Plan: Growth
- 5Y CAGR: Sorted from highest to lowest
🚀 Pro Tip: You can use Tickertape’s Mutual Fund Screener to research and evaluate funds with over 50+ pre-loaded filters and parameters.
Overview of the Gold Mutual Funds
LIC MF Gold ETF FoF
LIC Mutual Fund, established on April 20, 1989, by LIC of India, is one of the oldest mutual fund houses in the country. The LIC MF Gold ETF FoF has an Asset Under Management (AUM) exceeding ₹14 crore. It has recorded a 3-year rolling return of 12.7% with a Sharpe Ratio of 1.18, indicating the fund’s risk-adjusted performance.
Axis Gold Fund
The Axis Gold Fund is managed by Axis Asset Management Company Ltd., a subsidiary of Axis Bank, which holds a 74.99% stake, while the remaining 24% is owned by Schroder Singapore Holdings. The fund has a 3-year rolling return of 12.56% and a Sharpe Ratio of 1.17, reflecting its historical return per unit of risk.
Invesco India Gold ETF FoF
Managed by Invesco, a global investment firm headquartered in Atlanta, Georgia, this fund draws on the company’s presence across 25 countries and experience in serving clients from 120 nations. The Invesco India Gold ETF FoF has delivered a 3-year rolling return of 12.41% and maintains a Sharpe Ratio of 1.11, showcasing its historical performance.
HDFC Gold ETF FoF
HDFC Asset Management Company, a joint venture between Housing Development Finance Corporation (HDFC) and Standard Life Investments, manages the HDFC Gold ETF FoF. This fund has achieved a 3-year rolling return of 12.39% with a Sharpe Ratio of 1.21, presenting its historical risk-return profile.
SBI Gold Fund
SBI Funds Management Ltd. (SBIFML), backed by the State Bank of India, has over three decades of experience in fund management. The SBI Gold Fund has posted a 3-year rolling return of 12.56% and the highest Sharpe Ratio of 1.23 among the listed funds.
Kotak Gold Fund
The Kotak Gold Fund is managed by Kotak Mahindra Asset Management Company, a wholly owned subsidiary of Kotak Mahindra Bank. The fund’s performance is reflected in its 3-year rolling return of 12.2% and a Sharpe Ratio of 1.21, indicating its risk-adjusted return history.
Nippon India Gold Savings Fund
The Nippon India Gold Savings Fund is managed by Nippon India Mutual Fund, which has Average Assets Under Management (AAUM) of ₹2,79,431 crore. The fund has recorded a 3-year rolling return of 12.22% with a Sharpe Ratio of 1.15.
Aditya Birla Sun Life Gold Fund
Aditya Birla Sun Life AMC, a joint venture between the Aditya Birla Group and Sun Life Financial Inc. of Canada, manages the Aditya Birla SL Gold Fund. The fund has achieved a 3-year rolling return of 12.33% and a Sharpe Ratio of 1.13, representing its historical return and volatility.
ICICI Prudential Regular Gold Savings Fund
ICICI Prudential AMC, a joint venture between ICICI Bank and Prudential Plc, manages the ICICI Prudential Regular Gold Savings Fund. The fund’s performance is marked by a 3-year rolling return of 12.26% and a Sharpe Ratio of 1.2, reflecting its historical return per unit of risk.
Quantum Gold Saving Fund
Quantum Asset Management Company Pvt Ltd. manages the Quantum Gold Saving Fund, focusing on transparency and disciplined asset management. The fund has delivered a 3-year rolling return of 12.33% with a Sharpe Ratio of 1.22, indicating its historical risk-return trade-off.
What Are Gold Mutual Funds?
Gold mutual funds are investment funds that include assets associated with gold. These assets can range from physical gold, such as gold bars, to financial instruments linked to gold, like stocks of gold mining companies and gold exchange-traded funds (ETFs). In India, gold mutual funds often operate using a fund of fund (FoF) structure, where the primary investments are in other gold-related mutual funds or ETFs rather than directly holding physical gold.
Investing in gold mutual funds allows investors to gain exposure to gold without the need for purchasing and storing physical gold. This can provide a hedge against inflation and diversification for an investment portfolio. The performance of gold mutual funds is directly tied to the price movements of gold in the market. Therefore, any fluctuations in gold prices will reflect in the value of these mutual funds.
Fund of Funds (FoF) Type of Gold Mutual Fund
A Fund of Funds (FoF) type of gold mutual fund invests in other gold-focused mutual funds or ETFs rather than directly in physical gold or gold stocks. This strategy can provide broad diversification by spreading investments across multiple funds, potentially reducing risk. Managed by professional fund managers, FoFs may benefit from expert oversight, which could enhance returns compared to individual investment strategies.
FoFs simplify the process of gaining exposure to the gold market, making them accessible to investors without demat accounts. Additionally, they can eliminate the need for storage and security costs associated with physical gold, though management fees will apply. Overall, FoFs may offer a convenient and potentially lower-risk way to invest in gold, ideal for diversifying investments and hedging against economic uncertainties.
How to Invest in Gold Mutual Funds?
To invest in gold mutual funds, you can follow these steps:
- Step 1: You may want to open a demat and trading account with a stockbroker or through an online investment platform. For example, you can open a demat account on smallcase! This account will enable you to purchase and manage your investments seamlessly. LINK?
- Step 2: Choose a gold mutual fund. To do this, you can use various resources to research and compare the best gold mutual funds in India. Tickertape Mutual Fund Screener offers over 50 filters to sort the list of mutual funds that invest in gold based on your preferred criterias. It’s advisable to conduct thorough research or consult a financial advisor to ensure you make an informed decision.
- Step 3: Once you have selected a gold mutual fund, you can invest in the fund. You have the option to make a lump sum investment or opt for a Systematic Investment Plan (SIP). If you opt for SIP, then it allows you to invest small amounts at regular intervals, such as monthly or quarterly, which can help in averaging out the purchase cost over time.
After investing, it is crucial to monitor your investment regularly. This helps you ensure that your investment is performing in line with your expectations and allows you to make adjustments if necessary.
How to Find The Best Gold Mutual Funds?
- Historical Performance: Prioritise funds with consistent returns over 3-5 years, avoiding reliance on short-term gains.
- Expense Ratio: Opt for funds with a lower expense ratio to maximise net returns.
- Asset Allocation: Ensure the fund primarily invests in gold-backed assets for focused exposure.
- Fund Manager’s Expertise: Check the manager’s track record in handling commodity-based funds effectively.
- Tracking Error: Select funds with minimal tracking error for closer alignment with gold price movements.
- Exit Loads and Investment Requirements: Confirm exit charges and minimum investment amounts suit your budget and investment horizon.
How Do Gold Mutual Funds Work?
Gold mutual funds pool money from multiple investors to invest in gold-related assets. These assets can include physical gold, gold ETFs, and shares of gold mining companies. Here’s a detailed look at how gold mutual funds work:
- Investment in Gold Assets: Gold mutual funds invest in a diversified portfolio of gold-related assets such as physical gold, gold ETFs, and shares of companies involved in gold mining. This diversification may help spread the risk across different types of gold investments.
- Investment Flexibility: Investors can choose to invest in gold mutual funds through systematic investment plans or make lump-sum investments. This flexibility allows for a gradual build-up of investment over time, catering to different financial goals and investment strategies.
- Ease of Access and No Storage Costs: Unlike physical gold, which requires secure storage, gold mutual funds do not incur storage or security costs. They can be easily bought and sold through financial institutions or online platforms, making them accessible to a broad range of investors.
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 may have the expertise and experience to select the right stocks for the fund’s portfolio.
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 jewellery, 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.
How Are Gold Fund Returns Calculated?
Gold mutual funds invest in gold-related assets like physical gold, gold ETFs, and shares of gold mining companies. Understanding how the returns on these funds are calculated involves several key factors.
The primary metric for calculating returns is the Net Asset Value (NAV), which represents the per-unit market value of the fund’s assets minus its liabilities. The NAV is calculated at the end of each trading day.
NAV = (Total Assets – Total Liabilities) / Total Units Outstanding
Returns are primarily derived from the change in NAV over a given period. For example, if you buy a unit at an NAV of Rs. 20 and the NAV increases to Rs. 22 after one year, the return is:
Return = [(22−20)/ 20 ] × 100 = 10%
The expense ratio, an annual fee charged by the fund, covers management and operational costs. It impacts the net returns. For instance, if the gross return is 8% and the expense ratio is 1%, the net return would be 7%.
The performance of gold mutual funds is closely tied to the market value of gold. Fluctuations in gold prices directly impact the NAV and the overall returns of the fund.
Additionally, some gold mutual funds distribute dividends and realise capital gains by selling gold-related assets at a profit. These distributions can add to the total return of the investment.
In summary, gold mutual fund returns are calculated based on the change in NAV, expense ratios, market value of gold, and any dividends or capital gains distributed.
How to Select Top-Rated Gold Mutual Funds to Invest in?
When selecting top-rated gold mutual funds to invest in, you may want to consider the following factors:
- Performance: You can look for funds with a consistent track record of outperforming their benchmark index and other gold mutual funds over the long term, preferably at least 5 years. This can give you an idea of the fund’s stability and reliability in different market conditions.
- Fund Manager: Experienced and qualified fund managers can make a significant difference in the performance of a fund. You may want to research the fund manager’s background, experience in managing gold funds, and track record in delivering good returns.
- Investment Strategy: It is important to ensure that the fund’s investment strategy aligns with your investment goals and risk tolerance. Some funds may focus on investing in physical gold, while others might invest in gold mining companies or gold ETFs. Understanding the fund’s strategy can help you decide if it fits your financial objectives.
- Portfolio Concentration: Diversification within the fund’s portfolio is crucial. You may want to avoid funds that are too concentrated in a few sectors or stocks, as this increases risk. A well-diversified fund can help manage risk better by spreading investments across various gold-related assets.
By carefully evaluating these factors, you can make a more informed decision when selecting top-rated gold mutual funds to invest in.
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.
- Risk-averse investors: These investors may often consider investing in gold mutual funds due to their perceived stability and potential as a hedge against market volatility.
Risks Involved While Investing in Gold Mutual Funds
Investing in gold mutual funds can offer potential benefits, but it also comes with certain risks that you should consider. Here are some of the key risks associated with gold mutual funds:
- Price Volatility: The price of gold can be highly volatile, influenced by various factors such as economic conditions, geopolitical events, and currency movements. This volatility can lead to significant fluctuations in the value of your investment.
- Market Risk: Gold mutual funds may be subjected to market risk. If the overall stock market or economy experiences a downturn, it can negatively impact the performance of these funds. Market conditions can affect investor sentiment, leading to changes in the price of gold and related assets.
- Regulatory and Tax Changes: Changes in government regulations or tax policies can affect the performance and taxation of your gold mutual fund. It’s important to stay informed about any legislative changes that could impact your investments.
- 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. The performance of gold mutual funds can still be influenced by other economic factors that affect gold prices.
You may want to assess your investment objectives, risk tolerance, and time horizon before considering an investment in gold mutual funds. Additionally, it’s important to conduct your own research and/or consult a financial advisor before investing.
Taxation on Gold Mutual Fund as per Union Budget 2024-25
Short-Term Capital Gains (STCG)
The gains from gold mutual funds with holding periods under 24 months are now classified as short-term capital gains. The previous holding period for STCG was under 36 months. These gains are taxed according to your income tax slab.
Long-Term Capital Gains (LTCG)
The gains from gold mutual funds exceeding holding periods of 24 months are now classified as long-term capital gains. Here are a few changes made to the LTCG tax rate and holding period for international mutual funds:
- Holding Period: The holding period for LTCG on international mutual funds was reduced from over 36 months to over 24 months.
- Tax Rate: The long-term capital gains (LTCG) tax rate was reduced to 12.5%, previously taxed at 20%.
| Capital Gains Tax | Old Holding Period | New Holding Period | Old Tax Rate | New Tax Rate |
| Short-Term Capital Gains (STCG) | Under 36 months | Under 24 months | Taxed according to your income tax slab. | Taxed according to your income tax slab. |
| Long-Term Capital Gains (LTCG) | Over 36 months | Over 24 months | 20% | 12.5% |
Factors to Consider Before Investing in Gold MFs
Here are some factors to consider before investing in gold mutual funds.
- Performance and Track Record: Look for funds that have consistently outperformed their benchmark index and other similar funds over a long period, ideally five years or more. Consistent performance may indicate a well-managed fund capable of navigating various market conditions.
- Risk Tolerance: Gold mutual funds can be subject to price volatility due to fluctuations in gold prices, influenced by economic conditions, geopolitical events, and currency movements.
- Fund Manager’s Expertise: The experience and track record of the fund manager play a significant role in the performance of a gold mutual fund. You might want to research the fund manager’s background, experience in managing gold investments, and track record in delivering good returns.
- Expense Ratio: The expense ratio represents the annual fee charged by the fund to cover operating expenses. While lower expense ratios are generally favourable, it is essential to weigh the ratio against the fund’s performance and the services provided.
- Liquidity and Exit Load: Gold mutual funds can be bought and sold easily through financial institutions or online platforms, offering flexibility. However, some funds may charge an exit load if you redeem your investment before a specified period.
- Regulatory and Tax Changes: Stay informed about any changes in government regulations or tax policies that could affect the performance and taxation of your gold mutual fund.
Monitoring Your Gold Mutual Fund Investments
- Track NAV Trends: Regularly monitor the Net Asset Value (NAV) of your gold mutual fund to understand its performance. A steady rise indicates healthy returns, while fluctuations might signal market volatility.
- Compare with Gold Prices: Check how closely the fund mirrors gold price movements. Significant deviations could indicate inefficiencies.
- Review Fund Reports: Periodically review fund fact sheets and annual reports for updates on performance, expense ratios, and asset allocation changes.
- Assess Portfolio Allocation: Ensure your gold mutual fund still aligns with your overall investment strategy, especially if gold prices or economic conditions change.
- Consider Market Dynamics: Stay informed about global economic conditions, currency fluctuations, and inflation trends that affect gold prices.
- Review Exit Strategy: Regularly revisit your financial goals and investment horizon to determine if adjustments or redemptions are needed.
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 |
To Wrap It Up…
Investing in gold mutual funds can offer a strategic way to diversify your portfolio and hedge against economic uncertainties. These funds provide the benefits of professional management, ease of access, and the potential for high liquidity. However, it is crucial to consider various factors before investing, such as the fund’s performance, your risk tolerance, the expertise of the fund manager, expense ratios, and the investment strategy. Additionally, staying informed about regulatory changes and understanding the tax implications can help you make more informed decisions.
Frequently Asked Questions(FAQs) on Gold Mutual Funds
Gold mutual funds are investment funds that primarily invest in various forms of gold, such as physical gold or stocks of companies engaged in gold mining or production. These funds allow investors to gain exposure to the price movements of gold without directly owning physical gold.
There are two main types of gold mutual funds in India: Gold ETFs (Exchange-Traded Funds) and Gold Fund of Funds. Gold ETFs invest directly in physical gold and are traded on stock exchanges, while Gold Fund of Funds invest in gold ETFs and other gold-related assets.
Yes, you can invest in the best gold mutual funds through Systematic Investment Plans (SIP). You can choose to invest in daily, weekly, or monthly SIPs.
Gold-based mutual funds have potentially generated positive returns over the long term. However, their returns have been volatile in the short term. It is advisable to do your own research and/or consult a financial advisor before investing to understand the potential risks and rewards.
The investment tenure of gold mutual funds varies depending on the market conditions and the future outlook for gold. However, before investing, it is crucial to understand both the growth potential and challenges faced by gold mutual fund providers.
If you are looking for a diversified and flexible investment option, having 2 gold funds in your portfolio may be a good option. This can provide exposure to different gold assets and investment strategies. However, it is worthwhile to consult a financial advisor before making such decisions.
There is no perfect time to invest in gold mutual funds. The best time to invest is when you are comfortable with the current market conditions and your risk tolerance. Understanding the economic environment and your financial goals can help in making a well-timed investment decision.
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