Gold Mutual Funds vs. Gold ETF Which One is Best for You?
As you already know, Gold is very valuable to Indians. It is one of the most popular investment options in our nation because it holds very traditional and emotional value. As the world of finance changes, the investment in gold is also changing.
Now, you don't have to buy physical gold; it can be done digitally. Are you curious to know how? Well, Gold Mutual Funds presents an easy and sorted way for you to acquire gold without going through all the troubles of keeping the physical gold safe.
In this blog, you will draw a comparison between Gold Mutual Funds vs. Gold ETFs and you must decide which one is the better option for you in 2025.
Now without any further delays, let’s get this analysis started.
What are Gold Mutual Funds?
A professionally managed fund tool that pools money from investors and directly invests in gold or indirectly through gold-related funds is known as Gold Mutual Funds. It helps investors diversify their portfolios, reduce risk, and give higher returns. Through this mutual fund, you can invest in gold securities like gold mining and refined companies.
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Benefits of Investing in Gold Mutual Funds
To further understand this let's look at its advantages:
1. Low Investment
This mutual fund is a flexible option because you can start SIP with just Rs.500 to invest in gold. Meanwhile physical gold needs much more capital to start investing in gold.
2. Low risk
Investing in digital gold reduces the risk of loss of gold, as this is not present in physical form. It is managed by the SEBI (Securities and Exchange Board of India).
3. Liquidity
These Mutual Funds are highly liquid means they can be sold or redeemed their holdings any time during market hours. They are a convenient option for physical gold, as it needs buyers and dealing problems.
Top 5 Gold Mutual Funds in India
Here is a list of 5 best-performing gold mutual funds that you can buy in India to start a SIP with:
| Fund Name | Launch Date | AUM (Cr) | 3 Year Returns (%) | 5 Year Returns (%) |
|---|---|---|---|---|
| SBI Gold Fund | 30.09.2011 | 2,583 | 17.25 | 13.8 |
| Axis Gold Fund | 14.10.2011 | 707 | 17.35 | 13.96 |
| ICICI Pru Reg Gold Savings FOF | 01.10.2011 | 1,385 | 17.26 | 13.74 |
| Nippon India Gold Savings | 05.03.2011 | 2,203 | 16.89 | 13.79 |
| HDFC Gold ETF FoF | 05.11.2011 | 2,765 | 17.01 | 13.8 |
| Category Average | 16.79 | 13.6 | ||
These above-mentioned top 5 gold mutual funds are a good investment option to invest in gold funds and build strong wealth in the meantime.
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After knowing about gold mutual funds let's see another digital investment option to invest in gold.
What is Gold ETF?
Gold Exchange Traded funded is a trade market that tracks the price of physical gold in the domestic market. It is a convenient and cost-effective way for you to gain exposure to gold as an asset. It is like a company's stock price it fluctuates throughout the trading day based on the market demand and underlying gold price.
Let us see what are the benefits of the Fund.
Benefits of Investing in the Best Gold ETF
As you have read the advantages of Gold mutual funds, it is time to know the benefits of the best gold ETF as well:
1. Ease of Investment
Since it is a traded stock, it is easy for an investor to buy the gold at any time. It also gives the advantage of liquidity as users can easily buy or sell gold at market hours with ease.
2. Lower Costs
They are passively managed funds that track gold prices, resulting in lower expense ratios. Compared to actively managed funds.
3. Tax Benefits
Gold ETFs are considered more tax-efficient than holding physical gold. Long-term capital gains tax benefits may apply depending on local tax laws.
However, after knowing both digital ways of investing let us discuss the difference between them.
Key Difference between Gold Mutual Funds vs. Gold ETFs
Here is a side-by-side detail of gold mutual funds vs. gold ETFs:
1. Gold Mutual Funds
It does not require a demat account. An Investor can invest in gold through SIP which helps the user to start with a small amount. In this entry and exit have higher costs.
2. Gold ETF
In this, an investor needs a demat account to invest in these gold ETFs. It is not possible to have a SIP in exchange-traded funds as it needs to buy with more capital than a mutual fund. They do not have entry and exit loads. But they do charge a brokerage.
After having an understanding of both tools let's decide which one is best for you and what should you opt for investment.
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Conclusion
In short, Gold mutual funds vs. Gold ETFs both are emerging tools for investing in gold. The choice depends on your financial goals, investment strategies, and most importantly your comfort with managing your funds. However, the gold mutual fund is a more reliable and efficient way to invest in gold because it is a flexible and more convenient way to add gold to your portfolio. In this, you don't need a high capital to invest, A SIP which starts at Rs.100-500 is enough to start investing in gold.
FAQ's
1. Are Gold Mutual Funds a Good Investment Option?
Yes, a gold mutual fund is a very good option to invest because it gives you a flexible and less risky way to invest in gold. Investing in this fund will diversify your portfolio and help you to grow more.
2. What are the Disadvantages of Gold ETF?
Investing in gold ETF requires a Demat account and paperwork which sometimes is costly. This doesn't support SIP which makes it harder for beginners and low capital investors.
3. IS Gold Mutual Funds SIP Safe?
Gold is often considered a safe asset as it will protect your portfolio during a market crash. Gold prices tend to price so it is safe to have an SIP in a gold mutual fund.
