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Looking to invest in gold mutual funds? Here's all you need to know

Looking to invest in gold mutual funds? Here's all you need to know

Looking to invest in gold mutual funds? Here's all you need to know
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By Anshul  Aug 22, 2020 5:08:03 PM IST (Updated)

Gold mutual funds are open ended funds that allows the citizens to invest without demat account.

Gold is one of the most favoured way to diversify an investment portfolio. There are several ways to invest in the yellow metal—one being gold mutual funds (MFs). These are open-ended funds that allow the citizens to invest without Demat account.

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In gold MFs, there are asset management firms who purchase gold on investors’ behalf through exchange-traded funds (ETFs). The value of these funds is determined by way of Net Asset Value (NAV), which is disclosed at the end of the trading hours.
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“Gold mutual funds can be bought for asset allocation to diversify a portfolio or as a strategic investment for a later purchase,” says Vaibhav Saraf, Director, Aisshpra Gems and Jewels.
As a rule, gold MFs do not offer exceptional returns like most of the other mutual funds.
“This is because the underlying asset in a gold fund is gold which grows in price only on an occasional or seasonal basis. At other times, it generally offers lower returns than other investment instruments," according to PaisaBazaar.
Now, this means one should take it more as a hedge. Since gold is not responsive to stock market movements, holding it helps in hedging the risks associated with market-linked investment instruments.
Investments in these units can be done through Systematic Investment Plan (SIP), which could be started with a nominal amount of as low as Rs 1,000, according to ClearTax.
While selecting a fund, one should keep the financial goals, risk appetite and investment horizon in mind.
For investing in gold MFs, customers are required to visit any gold MFs offering platform and enter all requested details. On completion of KYC, they can invest in the units.
On withdrawal, gold funds generally charge an exit load within the predefined lock-in period. Units of gold funds can be redeemed by selling them back to the fund house based on the NAV for the day, as per ClearTax.
Disclaimer: CNBCTV18.com advises users to check with certified experts before taking any investment decisions.
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