Indians have always had a special inclination towards gold since time immemorial. With gold ornaments being chosen for every occasion, and gifting gold on celebrations, you will find its varied applications. Today, gold is also valued as an investment asset. It offers financial stability and serves as a hedge against market risks.

It has become an ideal investment option whenever the economy faces uncertainty, like inflation and geopolitical tensions. This raises the question: how can one invest in gold today? Beyond traditional methods of buying physical gold, many investors now view gold mutual funds as a more convenient option. If you are new to the concept of gold mutual funds, explore this blog to learn everything about investing in gold mutual funds.

What Are Gold Mutual Funds?

Gold mutual funds allow investors to gain exposure to gold either directly or indirectly through financial instruments. This is typically achieved through investments in gold ETFs, shares of gold mining companies, or other gold-related securities.

These mutual funds are open-ended investment vehicles that are based on the units available in gold Exchange Traded Funds. Their value directly depends on the price of the metal in the market. Gold mutual funds can act as a buffer during economic downturns. They are often recommended for portfolio diversification, typically comprising 10% to 20% of an investment portfolio.

The gold mutual funds mainly fall under three categories:

• Gold ETFs:

  These funds track the price of physical gold by investing in gold-backed assets. These include gold bullion or futures contracts. They are traded on stock exchanges. Moreover, they offer a convenient way to invest in gold without holding it physically.




• Gold Mining Funds:

  These funds invest in shares of companies involved in gold mining, production, and exploration. Their performance is influenced by gold prices and the operational efficiency of the companies they invest in.




• Gold-Backed Mutual Funds:

  These are diversified mutual funds that invest in a combination of gold ETFs, gold mining stocks, and other gold-related securities. They offer broad exposure to the gold market.

Advantages of a Gold Mutual Fund

A gold investment mutual fund in India comes with a plethora of investment benefits for investors. Let's see how:

1. Flexible Amount

   One of the key benefits of investing in gold is that it provides more convenience than physical gold, as you can purchase any amount of funds based on your requirements. You will be able to invest as low as Rs. 500, which helps people with lower incomes to choose this investment scheme. Contrary to physical gold, which is often pricy, these funds are more flexible for investors.




2. Great Liquid Investment

   Gold mutual funds are highly liquid and convenient investment options, especially for the short term. Compared to other types of assets, redeeming gold mutual funds is significantly easier and hassle-free. This makes them a practical financial cushion during periods of uncertainty or unexpected expenses. Additionally, there is no minimum redemption limit. This allows investors to withdraw any amount based on their specific financial needs.




3. Diversify Portfolio

   What makes gold mutual funds great for young investors is that they allow them to build their investment portfolio. Investing in these funds reduces overall market risk, further making them an excellent investment option. As gold is a physical asset, it is not directly proportional to company stocks. The market risk can be reduced by ensuring that the gold mutual fund returns are not affected when other assets are not doing well.




4. Safe Investment

   When it comes to investment, gold has often turned out to be the safest bet, be it in a virtual or physical form. What makes them even safer is that these funds are regulated by SEBI (Securities and Exchange Board of India). SEBI occasionally monitors and gives reports on the ongoing state of these funds, which helps investors to estimate and predict their gold mutual funds returns.




5. Professional Management

   Gold mutual funds are primarily handled by professionals who hold expertise in the investment market. They analyse market trends, geopolitical factors and mining companies to optimise returns. That means the investors do not have to worry about any of these factors and the risk of losing their money. Even if they do not have knowledge about the market conditions, they can benefit from managers who track gold markets, helping them mitigate risk.

Summing Up

Gold is a metal that has always been known for its class, reputation, and beauty. Gold mutual funds take this precious metal to a greater level, making it an excellent addition to one's investment portfolio. If you are looking for finance that serves as a cushion, a gold mutual fund is a hedge against inflation and economic uncertainties. There may be some risk of management fees and market volatility, but in the end, it comes down to how you manage your gold investment for a brighter tomorrow.

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.