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What is Gold Fund
A Gold Fund is a type of investment fund which invests in assets related to Gold. Investments can be in the form of physical Gold or Gold mining companies. By investing in these kinds of funds one may hold gold without physical possession.
There are various types of Gold funds:
- Gold Exchange Traded Funds (ETFs): Gold ETFs are exchange traded funds where the underlying asset is Gold. Therefore, the value of a Gold ETF depends upon the price of Gold. One needs a demat account to invest in an ETF.
- Gold Fund of Fund (FoF): Gold FoF invests in the units of Gold ETF and does not require a demat account.
What is the Purpose of Gold Funds
Gold has proven to be a safe-haven investment option as well as a good diversifier due to its low correlation with other asset classes such as equity and debt. Gold funds rely on the instruments that are directly linked to the prices of Gold and invest in Gold bullion. Gold funds can be an ideal investment tool for anyone who wishes to protect their capital against inflation and the uncertainties that we are facing in present times. It is a safe investment option as Gold rates do not witness fluctuations too often.
How Gold Mutual Fund Works
Gold funds are open-ended funds that invest in units of Gold ETF, Gold Bonds and Gold commodities. The primary goal of such funds is to create wealth by making use of Gold as an underlying.
Such funds are professionally managed by expert fund managers who take investment calls as per the objective of the fund.
Is Investing in Gold Fund Safe
Yes, it is safe to invest in Gold. This is due to the fact that such funds are a highly liquid asset class and funds are not trapped as it happens when physical Gold is purchased. Furthermore, the investor does not need to take the responsibility of keeping physical Gold safe or spending funds on its storage.
However, the Price may be volatile due to the price fluctuations.
Who should Invest in Gold Funds
Investors looking to benefit from the Gold Investing can consider investing as it provides various advantages such as –
- Allows for diversification of asset classes in an investors portfolio
- High Liquidity
- Is a hedge against inflation
- Most desired commodity
- Flexibility in the investment amount
Taxation
Gold fund returns are taxed as Short Term Capital gains which are levied on investments with a tenure of less than 36 months. On such investments tax is levied as per the income tax slab of the investor.
Long Term Capital gains are levied on investments with a tenure of more than 36 months. On such investments tax of 20% is applicable after providing the benefit of inflation indexation.
Things to Consider as an Investor
- Gold funds don’t provide regular income in the form of interest and dividends. The only income you can get from Gold is when it is sold in the open market.
- Price corrections can lead to volatility.
How to Invest in Gold Funds
There are various online Gold investment platforms. An investor can invest in Gold online by following the simple steps listed below.
Any investor can enjoy the benefits of investing through Nivesh in the following easy steps:
1. Create an account in Nivesh by providing your basic KYC details. (If you already have an account then just login into your account)
2. On your portfolio page click on the Buy New tab at the right top corner of the screen.
3. Select the category and choose the funds you want to purchase.
4. If you already know the name of the fund to buy, then you can search the particular fund through Quick Order.
5. Fill the transaction details and confirm. You can place up to 5 orders in one go.
6. You can make payment through your registered account through UPI, Direct Pay, or NEFT/ RTGS , Bank Mandate or Cheque. For same-day NAV, select UPI, Direct Pay or NEFT / RTGS as other payment options may take a few days to clear, Nodal account takes about 1-2 days to clear payment from the approved mandate and cheque takes about 2-5 days in clearing due to which you will not get the same-day NAV.
Frequently Asked Questions (FAQs)
1. Is it Good to Invest in Gold Fund?
Gold funds have several benefit as it is highly liquid asset and allows diversification which act as a hedge against inflation.
2. What is Gold Fund in Mutual Fund?
Gold funds are open-ended funds that invest in units of a Gold Exchange Traded Fund (ETF) or entities related to it. The primary aim of Gold funds is to create wealth by making use of the potential of Gold as a commodity.
3. Which is Better Gold ETF or Gold Fund?
Both are good ways to invest in Gold, however, Gold ETF needs a Demat account as well as it doesn’t provide a benefit of SIP investing.
4. Where do Gold Mutual Funds Invest?
A Gold fund is a type of investment fund which invests in assets related to Gold which is where Gold mutual funds returns are derived from. Investments can be in the form of physical Gold or Gold mining companies. By investing in these kinds of funds one may hold Gold without physical possession.
5. When to Invest in Gold Mutual Funds?
Investor should look at the market dynamics before investing in Gold. Generally, when the stock market crashes, Gold prices rises. Therefore, Investors should not invest their money in panic or hurry.
6. How to Buy Gold Mutual Funds?
There are various online Gold investment platforms. An investor can invest in Gold online by following the simple steps listed below.
Any investor can enjoy the benefits of investing through Nivesh in the following easy steps:
1. Create an account in Nivesh by providing your basic KYC details. (If you already have an account then just login into your account)
2. On your portfolio page click on the Buy New tab at the right top corner of the screen.
3. Select the category and choose the funds you want to purchase.
4. If you already know the name of the fund to buy, then you can search the particular fund through Quick Order.
5. Fill the transaction details and confirm. You can place up to 5 orders in one go.
6. You can make payment through your registered account through UPI, Direct Pay, or NEFT/ RTGS , Bank Mandate or Cheque. For same-day NAV, select UPI, Direct Pay or NEFT / RTGS as other payment options may take a few days to clear, Nodal account takes about 1-2 days to clear payment from the approved mandate and cheque takes about 2-5 days in clearing due to which you will not get the same-day NAV.
