Representative image
Gold remains one of India’s most trusted assets, but holding it in the form of jewellery or bars comes with storage worries and making charges. Gold mutual funds solve this problem. They let you invest in gold as easily as you invest in any other fund, without ever touching the metal. For anyone who wants safety and diversification, they’re one of the simplest options available today.
How these funds actually work
A gold mutual fund doesn’t buy jewellery. Instead, it invests in Gold ETFs or gold-linked instruments that move in line with international gold prices. When the price of gold rises, your fund value goes up too. You just buy units, hold them in your folio and redeem them whenever you want—no lockers, no purity checks, no tension.
Why gold helps balance your portfolio
Gold has a habit of rising when markets get shaky. That’s why it’s often called a hedge. If you already invest in equity funds, adding a small portion to gold can steady your overall returns. You don’t need a demat account to do this—gold mutual funds make diversification as easy as starting an SIP.
SIP or lump sum: what works better
If you want to build exposure slowly, SIPs work beautifully because they average out the ups and downs of gold prices. If you want quick exposure before an expected rise, a lump sum can do the job. Either way, liquidity is high—you can exit like any other mutual fund in just a few clicks.
What to check before choosing a gold fund
Story continues below Advertisement
All gold funds aim to follow gold prices, but they don’t do it equally well. Look at the expense ratio and the tracking error to see how closely a fund mirrors actual gold movements. Lower cost and lower tracking error usually mean a smoother long-term experience.
How taxation affects your returns
If the holding period of gold ETFs and gold mutual funds is less than or equal to 12 months, short-term capital gains tax will be applied on the gains. In such a situation, the gains will be taxed at slab rates for the taxpayer. If the holding period is more than 12 months, the gains will be taxed at 12.5 percent flat without the indexation benefit.
When gold funds make sense for you
Gold funds fit best when you want to reduce portfolio risk, protect against inflation or avoid managing physical gold. They won’t replace equities for long-term growth, but they play a valuable supporting role. For many investors, a small allocation makes the entire portfolio feel far more balanced.
A simple way to build long-term value
Gold mutual funds give you the convenience of digital investing with the comfort of gold’s long-term stability. Used in the right proportion, they help your portfolio stay steady during volatile phases while contributing to wealth creation over time.