Gold plays an important role in the Indian culture. Also, Investing in gold is known to be a safe haven for investors. Whenever something huge and unexpected happens globally like Brexit, Trump presidency or the recent demonetization in India, while other stocks see red, gold prices surge at such times. For reasons cultural or monetary, investors flock towards gold, making it one of the most sought after asset in the country (and globally).
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Gold is known to be an excellent Inflation hedge. It means that you can Buy Gold in today’s currency and can sell it at the value of the currency tomorrow. Thus, hedging the losses occurring due to currency devaluation.
There is always a demand for gold. No matter what the circumstances of the market, gold is a prized commodity internationally. So, if you want to sell off your gold today, you will always find takers for it.
As said earlier, during an international crisis, people start investing in gold. This happens mainly due to the fear of the unknown. Speculation causes gold prices to rise drastically thus having an inverse relation with the market. Hence the reason gold is known as a "Safe Haven" asset.
You can invest in gold either by buying physical gold or buying gold indirectly in the form of gold Mutual Funds or gold ETFs. Each form has its own set of advantages and disadvantages.
Gold funds are topping the returns chart for over three years now, making them an attractive option for investors. A gold ETF (Exchange Traded Fund) is an instrument that is based on gold price. It holds physical gold as the underlying asset.
Gold Mutual Funds are mutual funds that are issued with gold ETFs held as underlying assets. Here’s the difference between the two:
|Gold ETFs||Gold Mutual Funds|
|Purchase price based on the market value of gold||Purchase price based on NAV (Net Asset Value) of the fund|
|Hold physical gold as the underlying asset||Hold gold ETFs as the underlying asset|
|Requires a Demat account||Does not require demat account|
|Investors as to pay a brokerage chargers||Investors has to pay management fees as well as the underlying costs incurred for holding the ETFs|
Investing in gold is a great idea. But, buying physical gold has its own hassles. This is where gold funds or gold ETFs are a saviour.
One of the biggest concerns while buying gold is the purity factor. Gold bought through jewellery shops may or may not be 100% pure. Gold ETFs are backed by 24-carat gold so the investors are assured of the quality of the gold.
liquidity is another problem while buying physical gold. You have to take the gold to the jewellery shop and take whatever price he is willing to give you. There is no fixed price here. Whereas, gold funds can be liquidated by calling your broker or just a few clicks. The price of the ETF is linked to the international price of gold, so you know the exact value you would get.
Buying gold in the form of jewellery involves making charges which are included in the cost price. Whereas, gold funds don’t have such making charges, thus reducing the cost price.
Physical gold has to be brought from a trusted source, be checked for its purity and ensure you get a good price. Gold funds can be bought in minutes. The quality is assured and the prices are transparent, making them a better option.
On the taxation aspect, gold attracts VAT( Value Added Tax) and wealth tax. Neither of these applies to gold funds.
According to experts, a portfolio should have at least 5-10% invested in gold. It balances the portfolio since it has an inverse relation with the market. So, start investing in gold today and add some shine to your investments.
Below is the list of top
Gold Funds having AUM/Net Assets >
Fund NAV Net Assets (Cr) 3 MO (%) 6 MO (%) 1 YR (%) 3 YR (%) 5 YR (%) 2019 (%) Aditya Birla Sun Life Gold Fund Growth ₹12.5944
₹76 4.8 14.5 21 9.2 5.9 21.3 SBI Gold Fund Growth ₹12.5171
₹397 4.2 14.3 22.5 9.6 5.9 22.8 Nippon India Gold Savings Fund Growth ₹16.6131
₹755 4.7 14.2 22.4 9.1 5.8 22.5 Kotak Gold Fund Growth ₹16.5815
₹205 3.2 13.3 23.3 10.3 6 24.1 Axis Gold Fund Growth ₹12.4525
₹58 5 14 22.3 9.8 5 23.1 ICICI Prudential Regular Gold Savings Fund Growth ₹13.3166
₹86 4.2 12.7 21.8 8.7 6 22.7 HDFC Gold Fund Growth ₹12.8004
₹270 4 12.4 21.4 9.3 5.8 21.7 IDBI Gold Fund Growth ₹11.2628
₹33 4.5 11.8 21.2 8.7 4.8 21.6 Note: Returns up to 1 year are on absolute basis & more than 1 year are on CAGR basis. as on 22 Jan 20
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