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How to invest in gold through mutual funds route
Mutual fund route provides four options to invest in gold - Gold funds, Gold ETFs, Multi Asset Funds and International Gold Funds.
There has been a rush towards safer investment avenues given the uncertainty in economic environment caused by Covid19. People's love for the yellow metal is evident in the way the price of gold has increased by leaps in the last few months. Gold prices touched the record highs of ₹56,000 per 10 gram last week. Even though the prices have slightly come down from the record highs, most analysts believe the shine has not faded and the asset still remains a good buy.
There are a number of ways by which you can invest in gold. Mutual funds offer different ways to invest in gold. Investing in paper gold has several benefits like investors do not bear any making charges or premium. Also, they don't have to worry about purity, storage and insurance of gold. Here's a look at the options available.
Mutual fund route provides these options to invest in gold - Gold funds, Gold ETFs, Multi Asset Funds and International Gold Funds.
Gold ETF : A gold ETF or exchange-traded funds is listed on the exchanges and invest in physical gold. Each unit of a Gold ETF represents 1/2 gram of 24 karat physical gold. Gold ETFs provide ample liquidity as these can be sold on exchanges anytime. Gold ETFs are traded on the exchange at the prevailing market price of physical gold, thus investors can buy or sell holdings at close to the market price, without paying a premium on purchase or selling at a discount
Gold fund : A gold fund is an open-ended mutual fund scheme investing in units of gold ETFs. This does not require a demat account. An investor can invest and redeem from gold funds just like any other mutual fund.
Every gold fund or gold ETF has given over 30% returns in the last one year.
Multi Asset Allocation fund : A multi asset allocation fund falls in the hybrid category. It has to invest a minimum of 10% of their portfolio in at least three asset classes. Most multi asset funds have allocation to gold. However mutual fund advisors believe investors cannot trace their portfolio allocation to gold if they invest in multi asset allocation fund for exposure to the yellow metal. They say investors should opt for other better paperless options to participate in gold.
International gold funds: There are a few international gold funds available. These schemes invest in the units of overseas gold funds. Mutual fund investor believe international funds are very risk and are not suitable for retail investors. Only those who understand international markets may invest in them.
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First Published:15 Aug 2020, 07:55 AM IST
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