As the name suggests, these mutual funds invest in physical gold, which means that your money will be stored safely in vaults of authorized banks. The gold stored in these vaults is insured by the government of India, which means that you are covered against any damage or theft.

What are Gold Mutual Funds?

Gold mutual funds in India are a relatively newer concept and have been around for only two decades. These funds invest in gold and gold-related instruments such as bullion, coins, etc. It is a non-government-controlled gold investment instrument that helps individuals invest in physical gold without the hassles of buying it physically or investing in Gold ETFs.

Gold has been one of the most valued asset classes over the last five centuries. It has always been considered an asset that can hedge against inflation and other economic uncertainties.


These types of Mutual funds are one of the most popular investment schemes amongst investors in India. The main reason behind its high popularity is the tax benefits it offers. Gold Mutual fund investments are eligible for long term capital gains tax which means that you can hold the asset for more than one year without paying any tax.

Many investors in India prefer investing in gold mutual funds because of the Gold price volatility. Some other advantages include liquidation facility, transparency and low cost of transactions.

Benefits of Gold Mutual Funds India

Gold Mutual Funds also offer flexibility by allowing investors to track their mutual fund investments using SMS facility, 24x7 phone support service, various types of internet access like a website, chat, email etc.

There are various advantages of investing in Gold Mutual Funds. The primary benefit is that they help you earn income on your investment while keeping your capital safe from inflationary pressures. This also serves as a suitable medium for storing wealth for long term goals. Gold prices have always been on the rise due to their limited supply, making them a good option for long term investments.

The current fund value is always available on the net or even through their toll-free number; this helps investors track their portfolio values when required. This tracking method allows investors better understand when to sell their gold mutual funds and when to buy more.

Another benefit that attracts many investors is that they can redeem their mutual fund units anytime they want at par value. If an investor has invested Rs 50 thousand, he can get back his total amount if he discontinues his investment. The redemption feature makes the assets easy and flexible for all types of investors.

Gold has always been a safe investment option for investors. Gold Mutual Funds are also equally popular among investors due to their easy accessibility, liquidity options, tax benefits and safety.

How is the Mutual Fund for Gold Investment?

A gold mutual fund is an open-ended scheme that invests in the shares of companies in gold mining or manufacturing, gold bullion or gold futures market. The prevailing market price of gold will determine the value of your investment in a gold mutual fund. The primary objectives of investing in gold mutual funds are capital appreciation and income generation through dividends on investments.

Gold has been an excellent investment in the past decade, and it is considered one of the best investment instruments for Indians. Gold ETFs are not just a popular investment option for saving tax but also for hedging against inflation. Gold ETFs are the best vehicle to invest in gold because of the many advantages they offer.

Gold Mutual Funds are a good investment option for those who want to invest in gold, but due to various reasons, either they do not have the time to follow gold prices, or they want a handy solution. Different Asset Management Companies have launched gold Mutual Funds to cater to the needs of investors. In this article, you will find the basics of Gold Mutual Funds in India.

Fundamentals about gold mutual funds

Gold mutual funds are managed funds which means that a fund manager would invest your money on your behalf. There are no restrictions on the minimum amount required for investing in Gold Mutual Funds. This investment can be made through a Demat account or a standard savings bank account. You don't need to maintain a separate account for these funds.

All gold mutual funds have an initial lock-in period of three years, and there is no exit load if you redeem your units before the end of this period. However, exiting before three years might attract other penalty charges. You can save any number of units from these funds at any point in time, provided that the redemption value does not exceed your total investment in that particular fund.

Gold mutual funds invest in physical and paper gold and provide a return on investment. Gold funds can be a part of your portfolio to hedge against inflation and diversify the asset class. The returns from Gold Mutual Fund are taxed the same way as the returns from other mutual funds.

Categories of Gold Mutual Funds

An exchange-traded fund (ETF) is a type of exchange-traded fund which tracks the price of gold bullion. Mutual Funds invest in gold certificates from trusted banks stored in their vaults for safekeeping.

Gold ETFs invest in gold bullion, which is stored in the custodian's secure vaults for safekeeping. The difference between Physical Gold and Paper Gold is that while Physical Gold is stored in a vault, Paper Gold is just a certificate or an entry in a book that says that a certain amount of gold has been held at a particular place. In simple terms, Physical Gold needs to be stored somewhere, while paper gold needs not to be stored anywhere.

Gold mutual funds, like other mutual funds, allow investors to pool their money and invest in various stocks and bonds. The main difference is that gold mutual funds invest in gold, giving investors exposure to the price movements of the yellow metal without having to store and secure it themselves.

The value of gold can be highly volatile due to factors such as inflation or geopolitical events. But many investors believe that the price of gold tends to increase, moreover other investments such as stocks and bonds over the long term.

Wrapping Up

If you're looking for a way to invest in gold but don't want the hassle of storing and protecting it, a gold mutual fund might be a good option for you.

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