Why investing in gold saving schemes under mutual funds could be a good move during the pandemic.

Gold investments and savings

When you think of gold, your first thought will most likely be of physical gold that is available in the form of jewellery, bars, and coins. But there are better, more efficient, and definitely more lucrative ways to invest in this precious metal, such as gold mutual funds.

What are gold mutual funds?

If gold is your chosen form of investment, you should ditch the traditional investment avenue of buying jewellery and consider mutual funds that invest in gold instead. Such funds invest in physical gold, stocks of gold producing and distributing syndicates, and mining companies. Since these open-ended funds invest in units of gold exchange-traded funds (ETFs) where the underlying asset is physical gold, the value of your investment will be directly proportional to the cost of this precious metal. 

What are the advantages of investing in gold mutual funds?

While there are many advantages to investing in gold mutual funds, the most significant of these is the low and flexible investment amount, and the easy liquidity of this investment instrument. You can invest as little as Rs 500 in gold mutual funds. What’s more, you can access your money in a quick, hassle-free manner in case of an emergency – the money will reach your account in 2–3 working days.

Gold mutual funds are considered to be one of the safest investment avenues as they are monitored and regulated by the Securities and Exchange Board of India (SEBI). This makes them a sound form of investment to add to your portfolio. They lower risk and protect your wealth when other assets and instruments perform poorly. Besides, you get to invest in gold without worrying about the hassles associated with possessing physical gold, such as security and storage.

Related: 7 Benefits of investing in gold ETFs 

Why are gold mutual funds the right investment option?

If you’re looking to diversify your investment portfolio and balance out your riskier investment choices, gold mutual funds are definitely a good option. Given the high regulation norms enforced by SEBI on gold funds, they are also a strong choice for conservative investors. Many people also look at investing in gold mutual funds as a tax-saving option as there is no tax deducted at source (TDS) applied at the time of trading or maturity of these funds.

Why is now a good time to invest in gold mutual funds?

Gold mutual funds are considered a great way to diversify your investment portfolio and protect your wealth from market fluctuations. In today’s economy, where uncertainty is prevailing due to the ongoing global pandemic, investing in gold mutual funds not only helps to create wealth but also provides you with a comfortable financial cushion if the market collapses.

Related: 5 Gold schemes offered by jewellers and how they work 

Top gold mutual funds in India

While investing in gold mutual funds is definitely a sensible option, you should exercise discretion by choosing the right fund. Gold funds can be assessed comprehensively on the basis of various qualitative and quantitative factors. Keep in mind aspects like risk preferences, duration of investment horizon, and the nature and timelines of your financial goals before making your choice. Also read: Is gold a safe investment avenue in bleak times like these?

Here are some of the top gold mutual funds in India with information on their 1, 3 and 5-year returns:

Name of fund 1-year return (p.a.) 3-year return (p.a.) 5-year return (p.a.)
Kotak Gold Fund +50.35%. +30.29% +20.1%
HDFC Gold Fund +51.39% +29.65% +19.62%
SBI Gold Fund +49.4% +29.47% +19.56%
Nippon India Gold Savings +52.07% +29.64% +19.54%
Quantum Gold Savings Fund +52.23% +29.57% +19.43%
Axis Gold Fund +47.88% +29.47% +19.35%
Aditya Birla Sun Life Gold Fund +47.89% +28.97% +19.2%
ICICI Prudential Regular Gold Savings Fund (FOF) +49.04% +29.06% +19.1%

Source: ET Money

Disclaimer: This article is intended for general information purposes only and should not be construed as investment or tax or legal advice. You should separately obtain independent advice when making decisions in these areas.