Is It A Good Idea To Invest In Gold Mutual Funds

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Gold is the traditional way of investment in India and has remained popular for many generations. The traditional way was simple: buy the gold, hold it in your possession, and later sell it at a higher price to make profit. It, however, always carried the worrisome aspect of safekeeping and the threat of theft.

The modern financial market, however, has greatly resolved this issue by allowing investments in Gold Mutual Funds. These funds offer you the benefits of investment in gold and related assets without the investors having to worry about the physical possession.

What are Gold Mutual Funds

Gold Mutual Fund is a specific category of mutual funds where investments are made into stocks and securities exclusively linked to gold. These stock and securities can be of gold mining, producing, processing or distribution companies.

Gold Mutual Fund provides an ease of investment and ideal for investors who want to create a diverse portfolio. The golf fund is one of the best ways to lower the risk for investors as prices of gold-based assets rise when the market destabilizes. 

Why To Invest in Gold Mutual Funds

Gold Mutual Fund is a great choice for anyone who is looking for an investment in mutual funds. These funds offer a great opportunity to diversify your investment portfolio. Here are the reasons why you can choose to invest in gold mutual funds. 

It protects against inflation

More and more people seek to invest in gold during the spells of inflation which causes the gold price to rise during inflation. It is because the value of currency falls during spells of inflation which creates a rush of investments towards gold. 

It diversifies portfolio

Gold mutual fund is the best way to diversify your investment portfolio as it lowers the risk during any market crash. It is because gold prices remain stable, and even rise, when the financial market crashes. So even in extreme cases of market instability, investments made in gold mutual funds will be stable and lower your risk to incur losses.

It has high liquidity 

While most stocks and products do face liquidity issues at some or other point in time, gold has high liquidity as its supply is limited while the demand is persistently high. Therefore, the units of gold funds can be also easily sold and purchased from the asset management company or from the stock exchange.

No need for safekeeping 

In comparison to owning gold in its physical form, gold mutual funds are in electronic form and are safe in your demat account. Therefore by investing in a gold mutual fund, you are investing in gold without having to worry about its safekeeping.

When To Expect Profits

Gold mutual funds are a great addition to an investment portfolio because it assures profits in times of extreme market destability and geo-political crises. Here is when you can expect good profits: 

Geopolitical factor

Gold is a safe haven asset, which means that whenever there is a geo-political turbulence in the form of war or a threat of war, investors rush away from volatile and risky stocks and switch to secure assets like gold. So geopolitical factors are an impactful factor in deciding increased profits from gold mutual funds. 

Tax policy

Any increase in taxes pushes the prices of gold high as investors calculate the net asset value of their investments, recalibrate their investment portfolio and opt for more secure investments including gold. This creates a rush for gold purchase, which pushes its prices up. 

Market turbulence

Whenever the stock market faces any kind of instability and the stock prices begin to fall, the first rush begins for gold as investors try to save themselves from further instability and lower their risks. 

Picking the Right Fund

While investing in gold mutual funds comes with loads of advantages, it is also important to pick the right gold mutual fund. The factors that you need to take into account are your investment objective, risk appetite, expense ratio, and track record of the fund.

By carefully taking these factors into account, you can decide the fund that is right for you. You must read the offer document carefully and keep in mind that all mutual fund investments are subject to market risks.


Any sort of investment in gold is usually aimed at making a secure investment with lowered chances of risks. The investment in gold mutual funds, therefore, is one of the best investment products as it provides the benefits associated with investing in gold without having to worry about the safekeeping of physical gold. You can invest in gold mutual funds if you have long-term investment objectives and are skeptical about safekeeping.

Disclaimer: Investments in the securities market are subject to market risk, read all related documents carefully before investing.

This content is for educational purposes only. Securities quoted are exemplary and not recommendatory.

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