Did you know that gold was used as money for centuries? Yes, even today, it remains one of the most desirable commodities. This has made Gold Mutual Funds a great alternative against physical gold.

During hard economic times, most people prefer to invest in gold as this is one of the safest forms of investment. Instead of buying physical gold which has some problems of its own. What other thing could you do?

It makes incredible sense for a modern investor like you to invest in the best Gold Funds. You will find these funds to be simple to invest in gold without having to bother with where to store, secure, or insure it.

Do you need an investment with high and assured returns on investments? Looks like you just found it. Finding Gold funds can be quite an easy task; these gold funds could be the right kind for your portfolio.

This post will give you some insane advice on switching from your regular equity funds to gold ETFs. Let’s begin the analysis with a clear picture of what this category means.

What are Gold Mutual Funds?

Gold funds are popular mutual funds that focus their investments. It is mainly on items connected with gold. Instead of buying physical gold yourself, you can invest in a fund that holds the following:

• Gold ETFs (Exchange-Traded Funds): These funds directly replicate the price of gold by owning physical gold too.
• Gold Mining Stocks: Several funds operate in the exploration, extraction and processing. It involves the selling of precious metals.
• Physical Gold: Investments gold bars or gold coins among the funds’ investment portfolio.

Most of the gold funds in India invest in gold ETFs rather than direct purchases of gold. Similarly, using the “fund of fund” technique. That one is flexible and does not require actual physical gold to track its price. This setup gives the ability to profit from gold price changes.

In this guide, you will learn how gold funds work. It will give you an explanation of the different kinds of gold funds.

What is the Working Pattern of Gold Mutual Funds?

Gold funds or gold ETFs are products that offer a chance to pool money. This can be easily done by investing in gold-related assets like gold stocks and gold ETFs. Here’s how they typically work:

1.Fund Structure: Investors buy gold ETFs. The mining companies or physical gold depend on the specifics of the fund management.

2.Professional Management: A professional team of financial analysts who observe the market processes. They make well-thought-out decisions to bring maximum income for the investors.

3.Diversified Exposure: Not all gold mutual funds invest in one type of gold-related product. However, it invests in gold ETFs, and gold mining stocks. This provides a more diversified exposure to your portfolio.

4.High Liquidity: Gold funds are easily traded. Since one can buy or sell his units at the current market price even without the physical gold.

Next, you will see the risk factors connected with investing in these funds.

5 Best Gold Mutual Funds to Invest via SIP

Here are the 5 top-performing gold funds or gold ETFs to start your SIP with:

HDFC Gold Fund

Axis Gold Fund

Nippon India Gold Savings Fund

SBI Gold Fund

Quantum Gold Savings Fund

You can try out the simple SIP Calculator to know the estimated returns of your investments.

What Are the Risks of Gold Mutual Funds?

As with any investment, gold funds come with some risks:

1. Price Fluctuations: The price tendency of gold is also unpredictable. It depends on a number of aspects like political uprising, interest rates, exchange rates and so on. Even though gold is associated with growing demand. In the worst-case scenario, it is essential to know that gold price is variable as well.

2. Limited Growth Potential: Even though gold is considered to be a secure hedge instrument, it cannot reproduce itself as stocks do. This however points out that if one is looking to make high returns in the long run, gold alone will not do it. This is more effective as a hedge in the portfolio than as an actual growth tool.

3. Management Fees: As with all other mutual funds, there are management fees and expense ratios. Meaning that you also stand to lose some percentage of your income towards meeting these costs. This is because the lower the fees charged by the funds the better it is for the investor. Additionally, these funds contribute to your gains.

4. Market-Dependent Performance: The price of gold dictates the value of your investment in gold mutual funds. As with all gold funds, it means that if the worth of gold declines in the international markets, so shall the worth of your fund. Expect price changes and this should be looked at as a long-term investment.

Summary

You will find lots of investment options but these gold funds come in handy and add worth to your portfolio. If you wish to move forward with this category, SIP at an early stage is the best strategy for stable returns.

Moreover, with a disciplined systematic investment plan, you can adjust your investment amount. Build yourself a steady source of earnings with these gold funds and secure your future now.