Which One is the Best Gold Mutual Fund?

So since gold guards against inflation and economic downturns. It has traditionally been regarded as a safe-haven asset. Because of its consistency and long-term capital preservation. It has continued to captivate investors. The more practical, diversified, and professionally managed option. Is to invest in Gold Mutual Funds rather than the more conventional method of buying real gold. Still, how can you tell which gold mutual fund is the finest when there are so many to choose from?

This book aims to assist you in making an educated. Choice by providing a thorough understanding of gold mutual funds. Including their operation and a comparison of some of the best available alternatives.

What are Gold Mutual Funds?

Investments in gold exchange-traded funds (ETFs) are the main focus of open-ended gold mutual funds. Investors who wish to have exposure to precious metals without. Having to own them physically might invest in these funds. Which follows the performance of gold? Mutual fund returns on gold are directly correlated with changes in the metal’s price on both domestic and global markets.

Typically, the portfolio of these professionally managed funds. Consists of a mix of linked assets and gold exchange-traded funds. Being mutual funds, they are accessible to invest with SIP (Systematic Investment Plan). And a broad spectrum of investors, since one can begin investing with as little as Rs 500.

Why Make Gold Mutual Fund Investment

Compared to purchasing actual gold, investing in gold mutual funds has the following benefits:

Diversity: Since gold ETFs and occasionally linked securities are invested in. Gold mutual funds offer diversity. This allows you to diversify your assets and reduce investment risk.
Liquidity: Through mutual fund companies or online platforms. Gold mutual funds may be redeemed quickly and easily. Unlike real gold, which must be sold to a jeweller or dealer.
No Concerns About Storage: Safe storage of physical gold may incur extra charges. You may avoid the expenses and hazards of physically keeping gold by investing in gold mutual funds.
No Making Charges: Making charges must be paid when purchasing actual gold jewellery. This expense is removed with gold mutual funds.
Tax Benefits: Long-term capital gains tax applies to gold mutual funds. After three years, they benefit from indexation, reducing tax liabilities.

Best Gold Funds in 2024

Based on factors like expense ratio, returns, tracking error, and performance. Here are some of the top gold mutual funds available in India:

1. HDFC Gold Fund

Fund Overview: One of the most popular gold mutual funds. HDFC Gold Fund invests primarily in units of HDFC Gold ETF. It offers a low-cost option to invest in gold without worrying about storage or making charges.

Returns: Over the last 5 years, the fund has delivered consistent returns that are closely aligned with gold prices.
Expense Ratio: Approximately 0.65%, which is considered low in the industry.
Suitability: Suitable for investors looking for a low-cost, long-term investment in gold.

2. ICICI Prudential Regular Gold Savings Fund

Fund Overview: This fund primarily invests in ICICI Prudential Gold ETFs. It aims to offer investors returns that track the performance. Of gold while eliminating the need for physical gold.

Returns: The fund has provided competitive returns, closely tracking the domestic price of gold.
Expense Ratio: Around 0.50%, which makes it one of the cost-effective gold mutual funds.
Suitability: Ideal for investors who want consistent exposure to gold without high fees.

3. Axis Gold Fund

Fund Overview: Axis Gold Fund invests in Axis Gold ETFs, which provide returns corresponding to the price of gold. It is a popular choice among investors who want a reliable gold fund from a well-known AMC.
Returns: The fund has delivered moderate returns over the past few years. Making it a strong contender in the gold mutual fund category.
Expense Ratio: Around 0.60%.
Suitability: Best for conservative investors looking for a safe, long-term investment in gold.

4. Aditya Birla Sun Life Gold Fund

Fund Overview: This fund invests in the Aditya Birla Sun Life Gold ETF and. Aims to offer returns that track the performance of gold bullion. It is managed by one of the most experienced AMCs in India.

Returns: The fund has historically provided stable returns, with slight variations during market fluctuations.
Expense Ratio: Around 0.55%.
Suitability: Suitable for investors seeking to diversify their portfolio with gold at a moderate cost.

5. SBI Gold Fund

Fund Overview: The SBI Gold Fund primarily invests in units of SBI Gold ETFs. The fund is known for its low expense ratio and strong brand value.

Returns: Consistently good returns that closely track the price of gold. Making it one of the best-performing gold funds in India.
Expense Ratio: Around 0.50%.
Suitability: Suitable for investors who prefer a reputable brand with low costs and steady returns.

Factors to Consider When Choosing a Gold Mutual Fund

Before we dive into specific gold mutual funds. It’s important to consider a few factors that will help you choose the best one for your investment needs:

Expense Ratio: This is the annual fee that fund houses charge investors to manage the fund. Lower expense ratios typically mean higher returns.

Fund Performance: Look at the historical returns of the fund over 1-year, 3-year, and 5-year periods. This helps you understand how well the fund has performed over time. Especially during market fluctuations.
Tracking Error: This refers to the difference between the returns of the gold ETF and the actual price movement of gold. A lower tracking error indicates that the fund is better at closely mirroring the price of gold.
Liquidity: Ensure the fund you choose has enough liquidity, which ensures smooth buying and selling without significant impact on the price.
Investment Horizon: Gold mutual funds are ideal for medium- to long-term investors. Your financial goals and the time you’re willing to invest should align with the nature of gold funds.

Conclusion

In conclusion, gold mutual funds offer a convenient and cost-effective way to invest in gold without the hassles of physical ownership. They provide diversification, liquidity, and tax benefits, making them ideal for long-term investors. Top options like HDFC Gold Fund, ICICI Prudential Gold Savings Fund, and SBI Gold Fund offer competitive returns with low expense ratios. When choosing a gold mutual fund. Consider factors such as performance, expense ratio, and tracking error to make the best investment decision. These funds can be a smart choice for portfolio diversification and protection against economic risks.