Best Gold Mutual Funds in India 2024

‘All that glitters is certainly gold’, is the new adage, going by the continued surge in gold prices in recent years. Gold, usually considered a traditional, slow, and conservative mode of investment, has gained a new sheen off late delivering over 18% CAGR  returns in the last 5 years.

There is no doubt that precious metals like gold and silver hold timeless value and act as a hedge against inflation and volatility in all other forms of investment. Gold retains the intrinsic value of money being a scarce commodity. It is used by governments and investors world over as a safe alternative to preserve wealth.

While there are many ways to invest in gold, in this article we will discuss how you can participate in gold rally digitally and invest in the best gold mutual funds in India to invest even with a small corpus. 

What is a Gold Mutual Fund?

There are many avenues to invest in gold such as buying coins, bars, jewellery, gold bonds, ETFs, etc. Gold mutual funds present a simple way to start investing in gold through online platforms in a few clicks, set up SIPs or lumpsum investments without keeping a large sum aside.

Gold mutual funds are a category of mutual funds that invest indirectly in gold i.e. via other instruments that buy physical gold or gold-related investments. Gold mutual funds invest in gold ETFs or exchange-traded funds. Gold ETFs are financial instruments that buy physical gold of highest purity and are traded on stock exchanges. They also buy other instruments directly related to gold.

Gold mutual funds are a convenient and hassle-free mode for investors to diversify their portfolio, and hedge their investments against inflation and volatility in other asset classes. The movement in Gold fund NAV is directly related to the price of gold, hence investors get direct exposure to the commodity through the mutual fund route.

How to Choose the Best Gold Mutual Fund

There are many gold mutual funds available in the market. You can choose the best gold mutual funds using the below pointers:

• Fund Performance: While selecting the best-performing gold mutual funds in India, evaluate the fund’s performance over a period of time compared to the benchmark. Compare risk-return metric with other funds in its category. Choose funds that track the benchmark’s performance closely or have outperformed the index.

• Investment Goals: It is important to align your investment goals and risk appetite with your portfolio you build. Gold as a commodity can fluctuate in value over the short term due to various economic and global factors. A long time horizon and moderate risk appetite are suitable for allocation to gold mutual funds.

• Track Record: AMC and fund manager’s past record and expertise in managing portfolios and delivering results consistently is a crucial factor, especially tiding over tumultuous market cycles or unexpected events.

• Portfolio: Even though gold mutual funds focus on a single asset class, there are different types of underlying gold-related instruments fund managers invest in. Investors must look at a fund’s portfolio and assets before investing. 

• Cost: Expense ratio is the total administrative and management cost a fund charges to investors. It is charged as a percentage of total assets of the fund. The lower the expense ratio, the lesser the cost to investor. Therefore, investors must compare expense ratios while selecting funds. Gold funds being passive funds have generally lower expense ratios compared to actively managed funds e.g. equity, hybrid etc.

Top 10 Gold Mutual Funds in India 2024

Benchmark Index CAGR Return (3Y) = 11.58%

10 Best Gold Mutual Funds in India

Here’s a list of best performing gold mutual funds in India in 2024.

1. SBI Gold Fund

SBI Gold Fund is from SBI Mutual Fund AMC, one of the largest AMCs in India. The fund was launched on 12 Sept, 2011 with an aim to provide returns that closely correspond to returns provided by SBI Gold Exchange Traded Scheme (SBI GETS). 

The fund manages an AUM of Rs. 2245 Cr and has delivered a CAGR return of 9.90% since inception.

2. Axis Gold Fund

Axis Gold Fund is an open-ended gold commodities scheme benchmarked against the Domestic Price of Gold. Launched on 20th October 2011, the scheme seeks to generate returns that closely correspond to returns generated by Axis Gold ETF. 

The fund manages an AUM of Rs. 603 Cr and has delivered a CAGR return of 9.64% since inception.

3. Quantum Gold Savings Fund

Launched on Apr 01, 2017, Quantum Gold Savings Fund is an open-ended gold commodities scheme that belongs to Quantum Mutual Fund House.

The fund aims to provide capital appreciation by predominantly investing in units of Quantum Gold Fund - Exchange Traded Fund.

4. ICICI Pru Regular Gold Savings Fund

ICICI Prudential Regular Gold Savings Fund (FOF) is an open-ended gold commodities scheme from ICICI Prudential Mutual Fund House. Launched on Oct 11, 2011, the scheme aims to generate returns by investing in units of ICICI Prudential Gold Exchange Traded Fund. 

It is benchmarked against the domestic price of gold. The fund manages an AUM of Rs. 1157 Cr and has delivered a CAGR return of 9.78% since inception.

5. HDFC Gold Fund

HDFC Gold Fund is an open-ended gold commodities scheme from HDFC Mutual Fund AMC.

The fund was launched on Nov 01, 2011 and its investment objective is to generate capital appreciation by investing in units of HDFC Gold ETF.

The fund manages an AUM of Rs. 2496 Cr and has delivered a CAGR return of 9.86% since inception.

6. Invesco India Gold ETF FOF

Invesco India Gold ETF is an open-ended gold commodities scheme that belongs to Invesco Mutual Fund AMC. Launched on Mar 12, 2010, the fund’s goal is to provide returns that closely correspond to the return provided by the price of gold through investment in physical gold.

It is benchmarked against domestic price of gold. The fund has delivered a CAGR return of 9.65% since inception.

7. Nippon India Gold Savings Fund

Launched on March 7, 2011, Nippon India Gold Savings Fund is open-ended gold commodities scheme from Nippon India Mutual Fund House.

The fund scheme seeks to provide returns that closely correspond to returns provided by R*Shares Gold BeES (ETF). The fund manages an AUM of Rs. 2038 Cr and has delivered a CAGR return of 9.70% since inception.

8. Kotak Gold Fund

Kotak Gold Fund - Regular Plan is an open-ended gold commodities scheme which belongs to Kotak Mahindra Mutual Fund House. Launched on Mar 25, 2011, the scheme seeks to generate returns by investing in units of Kotak Gold Exchange Traded Fund.

The fund manages an AUM of Rs. 2123 Cr and has delivered a CAGR return of 9.91% since inception.

9. Aditya Birla SL Gold Fund

Launched on Mar 20, 2012, Aditya Birla Sun Life Gold Fund is an open-ended gold commodities scheme from Aditya Birla Sun Life Mutual Fund AMC.

The investment objective of the fund is to provide returns that tracks returns provided by Birla Sun Life Gold ETF. It is benchmarked against the domestic price of gold.

The fund manages an AUM of Rs. 393 Cr and has delivered a CAGR return of 9.7% since inception.

10. LIC MF Gold ETF FOF

LIC MF Gold ETF FOF is an open-ended gold commodities scheme from LIC Mutual Fund AMC.

The fund was launched on Nov 09, 2011 and aims to provide returns that closely correspond to the return provided by the price of gold through investment in physical gold in domestic market via LIC MF Gold ETF.

The fund manages an AUM of Rs. 64 Cr and has delivered a CAGR return of 9.37% since inception.

How Do Gold Mutual Funds Work

Gold mutual funds are categorised as FOF (Fund of Fund) type of mutual funds. Fund of Funds do not invest in assets directly but invest in particular assets through other funds or instruments. Gold mutual funds or FOFs do not invest in physical gold directly but they invest in ETFs that buy physical gold and track the gold prices directly.

Gold Mutual Funds have following features:

• Mutual Fund Product: A Gold mutual fund scheme is basically a mutual fund product that collects funds from several investors and invests the corpus collectively into gold-related instruments as per the specified fund objective. Gold funds work on the exact same principle as any other mutual fund under SEBI’s purview.

• Professionally Managed: Gold mutual funds are managed by a professional fund manager with experience and expertise in researching, analysing, and managing large investments. Fund managers study and monitor the available investment options and markets, and take periodic investment calls to deliver the best possible returns while minimising risks.

• Daily NAV: Just as any other mutual fund, gold funds declare NAV for every business day. Investors buy and sell units at prevailing NAVs. NAV is calculated in accordance with SEBI guidelines. The NAV of units varies according to the gold rate movement on a daily basis.

• Digital Purchase: Gold mutual funds enable investors to buy gold digitally without the hassle of buying and storing physical asset. There is no need to check gold’s purity or negotiate additional making/wastage charges. Gold funds can be easily purchased through online platforms within minutes. 

• SIP: While physical gold is expensive to buy, investors can set up SIPs and invest in gold funds even with small amounts as low as Rs 500 per month. 

Why Invest in Gold Mutual Funds

Investing in gold as an asset class can add extra shine to your portfolio, let’s see how.

• Diversification: Gold as an asset class is historically regarded as a storehouse of value and a protection in times of turbulence. Every portfolio can benefit from diversifying in different asset classes that may not be correlated in terms of price movement. Globally, gold is a safe haven investors flock to, as its value cannot go down to zero. Gold is not a paper asset and holds real exchange and purchasing power at all times.

• Liquidity: Gold mutual funds are highly liquid and widely traded on stock exchanges. While physical gold may need an actual buyer or seller to exchange, gold mutual funds can be bought or sold easily through stock exchanges. 

• Flexibility: You can invest in gold mutual funds from the comfort of your home without visiting any outlet, dealer or broker. You can open an online account with online platforms such as Rupeezy and start investing within minutes. You can also view your holding value and sell units instantaneously online at the prevailing NAV.

• Affordable: You can invest in gold mutual funds with an amount as low as Rs 10,000 or a monthly SIP of Rs 500. No need to plan or budget, or wait for any auspicious occasion. You can buy a small number of units every month at different gold prices to average the cost over a period.

• Cost Effective: Gold mutual funds do not have any entry or exit load, they incur an expense ratio in the range of 0.1-,2% which is nominal compared to wastage or making costs involved in physical gold purchase.

• Highest Purity: Unlike physical gold where purity and quality are a concern, gold funds invest in assets where regulator SEBI mandates the highest purity of gold commodity as per international standards.

Factors to Consider Before Investing in Top Gold Mutual Funds

• Price Volatility: Gold price movements depend on various factors such as inflation, global economic conditions, geo-political stability, demand-supply, interest rates, currency movements, market sentiment, etc. Investors must have the appetite to absorb volatility and even low-return commodity cycles. For example, gold rates remained range-bound between 2014 and 2018.

• Unforeseen Events: Gold mutual funds, like any other asset class, can be impacted by unforeseen and adverse market situations e.g. war, recession, sharp currency movements, global slowdown, weak sentiment etc, which can suppress gold fund returns and stability. Gold is a relatively stable asset, yet subject to market conditions and risks.

• Regulatory Policies: Any regulatory changes such as duties or additional taxes can impact the demand and price of gold, which, in turn, can impact the performance and returns of gold mutual fund schemes. As an investor, you must keep track of policy changes that can affect your investment.

• Taxation: Any capital gains arising from gold mutual funds are subject to taxation. In the recent Union Budget, government announced following changes in taxation and duration of capital gains:

• Reduced Holding Duration: The holding period for gold mutual funds to qualify for LTCG (Long Term Capital Gains) Tax has been reduced from 36 months to 24 months.

• Revised LTCG Tax Rate: The LTCG tax rate for gold mutual funds has been revised to 12.5% for investments redeemed after a holding period of 24 months. Earlier investments held over 36 months were liable for 20% LTCG Tax.

• STCG Tax Rate: Capital gains on investments held for less than 24 months are considered STCG. These are added to investors’ income and taxed as per the income tax slab rate. 

How to Invest in Gold Mutual Funds

Investing in gold mutual funds is easy and convenient and involves a few simple steps:

• Visit the Rupeezy app and go to the ‘Explore’ tab.

• Select the fund of your choice or simply search for ‘Gold’

• Check the details of funds available, e,g, returns, benchmark comparison, risk, AUM, assets, expense ratio, risk ratios, comparison with other funds etc.

• Select the desired fund and choose One-Time or SIP Mode

• Enter the amount and make payment with UPI or net banking.

• Once the units are allocated, you can track the fund value from the ‘Portfolio’ tab.

Conclusion

Gold, traditionally considered one of the best avenues for wealth preservation, has retained its sheen over various market cycles and acts as a shield against inflation and economic downturns. Gold mutual funds are cost-effective, convenient, and affordable, and you can invest even small amounts through the SIP route. Recent tax changes with reduced LTCG tenure and lower LTCG tax rate make gold funds an attractive option to diversify your portfolio with a 5%-10% allocation.