Gold funds are mutual funds which invest in various forms of gold – physical gold, shares of companies engaged in the business of gold mining and gold exchange traded funds (ETFs). However, in India it is observed that fund houses generally invest the assets of a gold fund in the units of gold ETFs. The below is a list of the Best gold funds in India.
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| Fund Name | NAV | Fund Assets | 1-Year | 3-Year | 5-Year |
| Axis Gold Fund | 12.53 | 45.59 | 22% | 5% | 5% |
| SBI Gold Fund | 11.76 | 305.16 | 26% | 4% | 4% |
| HDFC Gold Fund | 12.42 | 199.98 | 22% | 5% | 6% |
| Kotak Gold Fund | 16.3 | 133.16 | 25% | 6% | 6% |
| IDBI Gold Fund | 10.97 | 34.65 | 22% | 13% | 29% |
| Invesco India Gold Fund | 11.99 | 12.64 | 23% | 6% | 6% |
| Reliance Gold Savings Fund | 16 | 642.53 | 22% | 5% | 6% |
| Aditya Birla Sun Life Gold Fund | 12.12 | 60 | 23% | 5% | 6% |
| Canara Robeco Gold Savings Fund | 11.35 | 34.66 | 34% | 5% | 6% |
| ICICI Prudential Regular Gold Savings Fund | 12.63 | 48.88 | 25% | 5% | 5% |
| Quantum Gold Saving Fund | 15.32 | 14.37 | 25% | 5% | 5% |
Why Should You Invest in Gold Funds?
Gold fund is often chosen by investors over physical gold mainly because of two reasons. Firstly, it is more convenient to invest in a gold fund and hold an investment in the digital form rather than holding the commodity in its physical state. The storage of the precious commodity in the digital form also helps in mitigating the risk of loss due to theft.
Another reason which makes gold funds a popular and attractive choice among investors is the fact that they are managed by professional fund managers. The investors of a gold fund benefit from the expertise of professional fund managers who take all the investment decisions related to the fund by exercising their years of experience in the field of fund management. Whereas, investors who hold gold in its physical form get no such expertise and have to rely on their own research for taking buy and sell calls during turbulent market conditions.
How Are Gold Funds Different From Gold ETFs?
People often confuse gold funds and gold ETFs as the same thing. However, it is very important to understand the difference between the two in order to make informed investment decisions. The following are the key differences between a gold fund and a gold ETF:
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Pricing: A gold fund is a type of mutual fund and thus the value of its units can be derived from the fund’s Net Assets Value (NAV) at the end of a trading session. Whereas, a gold ETF is an exchange traded fund which is listed on the stock exchanges. You can get the real-time value of a gold ETF from the stock exchange at any time during the trading session.
Mode of Investment: You can buy the units of a gold fund by visiting either the website or branch of a fund house. You do not require a demat account for purchasing the units of a gold fund. Whereas, the units of a gold fund can be directly bought from a stock exchange after opening a demat account.
SIP option: Systematic Investment Plan (SIP) is a mode of investment which allows you to invest with small amounts (as low as Rs. 500) at regular intervals – monthly, quarterly or annually. SIP renders the benefit of power of compounding while keeping investment amount light on one’s pocket. The option to invest via a SIP is available in case of a gold fund but not in the case of a gold ETF. The minimum investment amount for gold ETFs is generally Rs. 5,000.
Transaction Cost: A gold fund may or may not charge an exit load at the time of redemption of units. No exit load is applicable in the case of gold ETFs since they are traded on the stock exchanges.
Also Read : How to Redeem Mutual Funds Online
Expense Ratio: Expense ratio refers to the fees charged by a fund house for the administration and management of a fund. While both schemes are passively managed, as a gold fund invests in a gold ETF, gold funds feature a higher expense ratio that a gold ETF.
Liquidity: Gold ETFs support intraday trading on stock exchanges and are thus more liquid (easily convertible into cash/cash equivalents) than a gold fund. The units of a gold fund can be redeemed by selling them back to the fund house at the applicable NAV.
Must Remember Points About Gold Fund Investments
Investing in a gold fund is always a wiser decision than investing in physical gold. But at the same time it is important to remember the following points about gold funds so that as an investor you make an informed decision:
Gold Funds Do Not Offer Exceptional Returns Like Other Mutual Funds
A gold fund does not offer exceptional returns like most of the other mutual funds. This is because the underlying asset in a gold fund as the name suggests is gold which grows in price only on an occasional or seasonal basis. During other times, it generally offers lower returns than other investment instruments.
Gold Fund Does Not Help in Diversification of Portfolio
Since gold is a relatively less volatile asset, it does not help an investor in diversifying his/her portfolio. Diversification is an important element in investing as it helps in dividing the risk and maximising the returns.
More Than An Investment, Gold Fund Is A Hedge
Another important point which everyone investor of gold fund must remember is that more than an investment, it is a hedge. Since gold is not responsive to stock market movements, holding it helps in hedging the risks associated with market-linked investment instruments.
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Taxation of Gold Funds
In India, gold funds and gold ETFs generally invest in physical gold rather than shares of gold mining companies. Thus, gold funds and gold ETFs are treated as non-equity instruments for taxation purposes.
| Investment | Holding Period | Rate of Tax |
| Gold Fund/Gold ETF | Short Term (Less than 3 Years) | As per investor’s income tax slab |
| Gold Fund/Gold ETF | Long Term (3 Years and more) | 20% with indexation |
Top 5 Gold Funds in India
The below is a list of the top 5 gold funds in India.
1. SBI Gold Fund
| Returns | 1 Year | 3 Year | 5 Year |
| Trailing Returns | 7.55% | 3.04% | 0.06% |
| Category Average | 8.19% | 3.30% | 0.15% |
| Benchmark Returns
(The Morning Fixing of Gold by the London Bullion Market Association (LBMA)) |
9.80% | 3.22% | 2.46% |
(Data as February 28, 2019; Source: Pulse Labs)
SBI Gold Fund has generated returns of 7.55%, 3.04% and 0.06% over the last 1 year, 3 year and 5 year periods respectively. However, the scheme has not been able to outperform its benchmark in any of the three tenures. The scheme has invested 99.87% of its assets in SBI ETF Gold as of February 28, 2019 and the balance of 0.13% in various cash/cash equivalent instruments.
2. Aditya Birla Sun Life Gold Fund
| Returns | 1 Year | 3 Year | 5 Year |
| Trailing Returns | 8.31% | 3.22% | 0.41% |
| Category Average | 8.19% | 3.30% | 0.15% |
| Benchmark Returns
(Domestic price of physical gold) |
9.80% | 3.22% | 2.46% |
(Data as February 28, 2019; Source: Pulse Labs)
Aditya Birla Sun Life Gold Fund has yielded a return of 8.31% over the last 1 year period, outperforming its benchmark return of 8.19% for the same tenure. During the 3 year period, the scheme generated a return of 3.22%, nearly mirroring its benchmark return of 3.30%. The scheme has succeeded in providing returns better than its benchmark during the 5 year period as well. The scheme’s 5-year return stood at 0.41% against its benchmark’s 5-year return of 0.15%. The scheme has invested 97.21% of its assets in Aditya Birla Sun Life Gold ETF (as of February 28, 2019) and the remaining 2.79% of its assets in cash and current assets.
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3. Reliance Gold Savings Fund
| Returns | 1 Year | 3 Year | 5 Year |
| Trailing Returns | 7.35% | 2.95% | -0.03% |
| Category Average | 8.19% | 3.30% | 0.15% |
| Benchmark Returns
(Domestic price of physical gold) |
9.80% | 3.22% | 2.46% |
(Data as February 28, 2019; Source: Pulse Labs)
Reliance Gold Savings Fund has generated returns of 7.35%, 2.95% and -0.03% over the previous 1 year, 3 year and 5 year periods respectively. The scheme has given good returns but has remained a little short in matching its benchmark returns during all the periods. The scheme has invested 99.97% of its assets in Reliance Gold ETF BeES and just 0.03% in cash and cash equivalents as of February 28, 2019.
4. Quantum Gold Savings Fund
| Returns | 1 Year | 3 Year | 5 Year |
| Trailing Returns | 9.50% | 3.51% | 0.55% |
| Category Average | 8.19% | 3.30% | 0.15% |
| Benchmark Returns
(Domestic price of physical gold) |
9.80% | 3.22% | 2.46% |
(Data as February 28, 2019; Source: Pulse Labs)
Quantum Gold Savings Fund is a great gold fund which has outperformed its benchmark in all the above-mentioned three tenures. The scheme has generated returns of 9.50%, 3.51% and 0.55% against its benchmark returns of 8.19%, 3.30% and 0.15% during the past 1 year, 3 year and 5 year periods respectively. The scheme has invested 99.79% of its assets in Quantum Gold Fund (ETF) and the balance of 0.21% in TREPS (Tri-Party Repo Dealing Systems) as of February 28, 2019.
5. Invesco India Gold Fund
| Returns | 1 Year | 3 Year | 5 Year |
| Trailing Returns | 9.79% | 5.49% | 0.46% |
| Category Average | 8.19% | 3.30% | 0.15% |
| Benchmark Returns
(Domestic price of physical gold) |
9.80% | 3.22% | 2.46% |
(Data as February 28, 2019; Source: Pulse Labs)
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Invesco India Gold Fund is an extraordinary gold fund which has given better returns than its benchmark during the 1 year period, 3 year period as well as 5 year period. The scheme generated a 1-year return of 9.79% against a return of 8.19% generated by its benchmark during the same period. The 3 year and 5 year returns of the scheme are 5.49% and 0.46% respectively. Whereas, the 3 year and 5 year returns generated by its benchmark stand at 3.30% and 0.15% respectively. As of February 28, 2019, the scheme has invested 99.14% of its assets in Invesco India Gold ETF and the remaining 0.86% of its assets cash and cash equivalents.