10 Best Gold Mutual Funds To Invest in 2024

Investing in gold is a tradition passed down through generations. It is a valuable asset that has maintained its value against inflation and deflation. 

However, purchasing physical gold isn't always feasible for everyone, and ensuring its safety can be challenging. 

So, rather than buying gold jewellery, you can invest in gold mutual funds. These are an attractive investment option for investors who want to balance their portfolios with a stable and profitable asset. 

In this blog, we’ll understand everything about gold mutual funds, including what they are, their benefits, top gold mutual funds, factors to consider before investing, and how gold fund returns are calculated.

Let's dive in.

What are Gold Mutual Funds?

Gold funds are a mutual fund type that invests in various forms of gold, like physical gold, Gold ETFs, gold-related securities, and mining stocks. These funds give investors a convenient and cost-effective way to add some gold exposure to their portfolio. 

Gold mutual funds remove the hassle of buying physical gold, and these investments are also eligible for long-term capital gains tax, which means profit up to Rs.1 lakh is tax-exempt; however, gains above ₹1 lakh are taxed at 12.5%. 

Benefits of Investing in Gold Funds

Let’s find out some of the benefits that you can receive by investing in gold funds.

1. Minimal Storage Costs

When you buy physical gold, you need to store it securely, often in a locker or safe, for which you have to pay storage and other charges. However, with gold mutual funds, your investment is held digitally, so there is no need for physical storage and the associated costs. 

2. Low Cost of Acquisition

While buying physical gold, you need to pay various charges, such as making charges for jewellery and GST. But while investing in the best gold mutual funds, you don't have to worry about these extra costs.  

3. Better Liquidity

Gold mutual funds have more liquidity than physical gold as you can easily sell the units at the fund’s current NAV (Net Asset Value). When selling physical gold, there are chances that you may not get the best price for it. However, this is not applicable for gold funds as the NAV ensures transparency and fair pricing.  

4. Suitable for Long Term Investment

Gold Mutual Funds are a good way to invest money for the long term and avoid the short-term volatility in gold prices. 

Best Gold Mutual Funds To Invest in 2024

Let’s explore some of the best gold mutual funds to invest in 2024. 

1. SBI Gold Fund

This SBI fund invests in gold bars, gold-related assets, and other stocks that provide exposure to the gold mining and research business. It will generate returns closely in line with the returns provided by the gold price.

2. Nippon India Gold Savings Fund

Nippon India Gold Savings Fund invests mainly in gold bars and related products and produces returns in accordance with the price of gold.

3. Kotak Gold Fund

Kotak Gold Fund invests in gold bars and related assets and provides returns that closely match the returns provided by the price of gold.

4. HDFC Gold Fund

HDFC Gold Fund is an open-ended Fund and deals with real gold of 99.5% quality. It generates returns that almost match the returns created by investing in real gold.

5. Axis Gold Exchange Traded Fund 

This ETF deals in real gold and provides you with profits that closely track the local prices of gold.

6. ICICI Prudential Gold Fund

This ICICI Prudential Fund invests in real gold and gold-related products and the investors get profits that closely track the local prices of gold.

7. Aditya Birla Sun Life Gold Fund

Aditya Birla Sun Life Gold Fund invests in gold bars and related assets to give investors returns that closely track the gold price performance.

8. DSP BlackRock World Gold Fund

This fund invests in stock equity-related assets of gold mining and production businesses worldwide.

9. Invesco India Gold Fund

Invesco India Gold Fund invests in gold bars and related products.

10. Quantum Gold Saving Fund

This fund invests its assets in physical gold and other mutual funds or ETFs, which in turn invest in gold.

Now, let’s compare all these best gold mutual funds on different parameters. 

Disclaimer: The above comparison is based on various parameters and is not fixed. It may vary according to market fluctuations.  

Important Factors to Consider Before Investing in Gold Mutual Funds

Below are the factors that you should consider before investing in gold mutual funds.

• Performance and Track Record

When choosing the right fund, study the history of all the gold mutual funds. Choose a fund that has outperformed its benchmark index and other similar funds for a very long time, no less than 5 years. 

• Risk Tolerance

Gold mutual funds are subject to price volatility because of the fluctuations in gold prices. Before investing in the fund, analyze your risk tolerance power to make sure that you are comfortable with the ups and downs of the market.

• Expense Ratio

The expense ratio of the gold mutual fund means the annual fee for the operating expenses of the fund. So, you should opt for that gold mutual fund, which has a lower expense ratio. 

• Liquidity and Exit Load

Before investing, check how easily you can buy and sell the fund. Gold mutual funds generally offer good liquidity and allow investors to access their money quickly when needed. 

But it’s worth remembering that you might be charged “exit load fees.”

It is a fee charged by the company when you sell the mutual fund units before a certain period. Different funds have different exit load structures. So, make sure to review all the details and costs involved. 

• Fund Manager Expertise

The success of a gold mutual fund often depends on the skills and experience of its fund manager. Research the manager’s track record and expertise in handling gold investments.

• Investment Strategy

It's important to understand the fund’s investment strategy to ensure it matches your financial goals and risk tolerance. Some funds focus on physical gold, while others invest in gold mining organizations or gold ETFs. Make sure you choose the one that aligns with your investment objectives. 

How Are Gold Mutual Fund Returns Calculated?

The primary metric for calculating gold mutual fund returns is the Net Asset Value (NAV). It represents the per-unit market value of the fund’s assets minus its liabilities. 

NAV is calculated at the end of each trading day according to the below formula. 

NAV = (Total Assets – Total Liabilities)​ / Total Units Outstanding

Let's understand it with an example. 

You bought one unit of gold mutual fund at a NAV of Rs. 30, and in 1 year, the NAV increases to Rs. 33. So, the return will be:

Return = [(33 - 30) / 30] × 100 = 10%

The expense ratio also impacts your net return. For example, if the gross return is 12% and the expense ratio is 2%, the net return would be 10%.

Conclusion

Gold Mutual Funds offer investors a convenient way to gain exposure to gold without buying it physically. Investing in these funds can be a wise idea to safeguard your investments in times of economic uncertainties. 

Remember to review all the details and consider talking to a financial advisor to make sure you choose the best gold mutual fund. 

Frequently Asked Questions (FAQs)

Ques 1. What are gold mutual funds?

Ans. Gold mutual funds invest in various forms of gold, like physical gold or stocks of companies engaged in gold mining or production. These funds give investors exposure to the price movements of gold without buying physical gold.

Ques 2. Who Can Invest in Gold-Based Mutual Funds?

Ans. People who are looking to diversify their portfolio, investors who are concerned about inflation, and investors who are new to investing can opt for investing in gold mutual funds.

Ques 3. What are the different types of gold mutual funds in India?

Ans. Gold ETFs (Exchange-Traded Funds) and Gold Fund of Funds are the two main types of gold mutual funds in India. Gold ETFs invest in physical gold, and Gold Fund of Funds invest in gold ETFs.

Ques 4. When should I invest in gold mutual funds?

Ans. There is no ideal time for a person to invest in gold mutual funds. When you are comfortable with the current market conditions is the best time to invest.

Ques 5. Can I do SIP in mutual funds gold investments?

Ans. Yes. You can invest in gold mutual funds through Systematic Investment Plans (SIP). You can choose any option between daily, weekly, or monthly SIPs.