Top Gold Mutual Funds: Best Investments for 2024

Gold is widely known as a secure investment, valued for its ability to maintain value over time. It's also a reliable asset for safeguarding investments during market volatility, often moving opposite to equities. Investing in gold offers various options: physical assets like coins, bars, and jewelry, as well as digital gold, gold mutual funds, ETFs, and government bonds. These diverse choices let you invest in gold without owning it physically. However, when it comes to mutual funds, caution is crucial.

Here, we've curated a list of the top Gold Mutual Funds in India for 2024. Investing in these funds can benefit those seeking exposure to gold without holding the physical metal. Let's delve into the world of Gold Mutual Funds and explore the available options.

What are Gold Mutual Funds?

Gold mutual funds are specific mutual fund schemes that primarily invest in products related to gold, such as gold bars, gold exchange-traded funds (ETFs), or stocks of companies engaged in gold mining and exploration. These funds seek to give investors exposure to gold price movements, enabling them to potentially profit from the precious metal's growth without physically owning or storing gold themselves

Quantum Gold Saving Fund

The Quantum Gold Saving Fund, managed by Quantum Asset Management, was introduced on January 1st, 2013. This fund focuses on investing in gold and related assets. Currently, it holds assets under management (AUM) worth Rs. 116.72 crore. Over the past 3 years, it has achieved a compounded annual growth rate (CAGR) of 13.76%, and over 5 years, the CAGR stands at 14.95%. The fund has an expense ratio of 0.06% and exhibits a volatility rate of 10.69%.  As a key player in the gold mutual funds sector, the Quantum Gold Saving Fund offers investors a specialized avenue for gold investment with strong historical performance.

LIC MF Gold ETF Fund of Funds

The LIC MF Gold ETF Fund of Funds, managed by LIC Mutual Fund, was started on March 1st, 2011. This fund focuses its investments in gold and related financial instruments. Currently, it holds assets under management (AUM) amounting to Rs. 53.51 crore. Over the past 3 years, it has achieved a compounded annual growth rate (CAGR) of 14.25%, and over 5 years, the CAGR is 14.66%. The fund has an expense ratio of 0.26% and shows a volatility rate of 11.71%. As a notable participant in the gold mutual funds sector, the LIC MF Gold ETF Fund of Funds offers investors a targeted approach to gold investment with robust historical performance.

Axis Gold Fund

The Axis Gold Fund, managed by Axis Asset Management, was launched on October 20th, 2011. This fund primarily invests in gold and related securities. Currently, it manages assets worth Rs. 482.60 crore. Over the last 3 years, it has achieved a compounded annual growth rate (CAGR) of 13.95%, and over 5 years, the CAGR stands at 15.43%. The fund has an expense ratio of 0.17% and exhibits a volatility rate of 10.33%. As a key player in the gold mutual funds sector, the Axis Gold Fund offers investors a specialized approach to gold investment with strong performance metrics.

Nippon India Gold Savings Fund

The Nippon India Gold Savings Fund, managed by Nippon India Mutual Fund, started on March 7th, 2011. It focuses on investments primarily in gold and related financial instruments. Currently, the fund manages assets totaling Rs. 1,842.45 crore. Over the past 3 years, it has achieved a compounded annual growth rate (CAGR) of 13.63%, and over 5 years, the CAGR stands at 15.07%. The fund maintains an expense ratio of 0.13% and shows a volatility rate of 10.98%. As a prominent player in the gold mutual funds sector, the Nippon India Gold Savings Fund offers investors a robust avenue for gold investment with strong historical performance.

Reliance Gold Savings Fund

The Reliance Gold Savings Fund has delivered returns of 7.35%, 2.95%, and -0.03% over the last 1 year, 3 years, and 5 years, respectively. Although the fund has performed well, it has slightly lagged behind its benchmark returns during these periods. As of February 28, 2019, the fund has allocated 99.97% of its assets to Reliance Gold ETF BeES, with only 0.03% invested in cash and cash equivalents.

SBI Gold Fund

The SBI Gold Fund has delivered returns of 7.55%, 3.04%, and 0.06% over the past 1 year, 3 years, and 5 years, respectively. Despite its performance, the fund has not exceeded its benchmark in any of these periods. As of February 28, 2019, the fund has allocated 99.87% of its assets to SBI ETF Gold, with the remaining 0.13% invested in various cash equivalents.

Factors to Keep in Mind Before Investing in Gold Mutual Funds

Investing in gold mutual funds follows the same process as investing in any other type of mutual fund. You can invest in gold mutual funds through a mutual fund provider.

Here are some key considerations for investors before putting money into gold mutual funds:

1. Lower Returns: Unlike stocks, gold investments typically don't yield very high returns. Investors often choose gold mutual funds during uncertain market conditions, but these may not generate substantial short-term gains.

2. Seasonal Behavior: Gold prices can follow seasonal trends, performing well during market crises but lagging behind during stable periods. Understanding these patterns by reviewing historical performance can provide insights for investors.

3. Diversification: For small to medium-sized portfolios, gold may not be the best choice for diversification due to its comparatively lower returns. Larger portfolios, however, can allocate a portion to gold funds to manage risk without compromising overall financial goals.

4. Dynamic Portfolio Allocation: Strategically adjusting gold investments based on market conditions is crucial. Increasing exposure during market downturns can potentially boost returns, while shifting funds to other assets as markets recover can capitalize on higher potential returns elsewhere.

5. Tracking Trends: While timing the market perfectly is difficult, tracking price fluctuations over time can help investors make informed decisions. Regular investments through Systematic Investment Plans (SIPs) can also mitigate the impact of market volatility when investing in gold mutual funds.

Final words

Investing in gold mutual funds presents an opportunity to diversify your investment portfolio and participate in the dynamic gold market. To make well-informed decisions, it's crucial to conduct thorough research, evaluate fund performance, and consider key factors such as expense ratios, portfolio diversification, and the expertise of fund managers. By taking these steps, investors can potentially leverage the growth and stability associated with gold investments.

It's important to acknowledge that like any investment, gold mutual funds carry inherent risks, and past performance does not guarantee future results. Seeking guidance from a qualified financial advisor and regularly reviewing your investment strategy are prudent measures to ensure alignment with your long-term financial goals and risk tolerance. This proactive approach enhances your ability to navigate market fluctuations and optimize your investment outcomes over time.

FAQs

Q. Is gold mutual funds a good investment?

A. Safe investment avenue – Gold funds are one of the safest investment options, as these mutual funds are regulated by the Securities and Exchange Board of India (SEBI).

Q. Which is better gold ETF or gold fund?

A. Gold mutual funds invest in gold ETFs while gold ETFs invest in 99.5% purity gold. Gold ETFs have no exit loads while gold mutual funds charge an exit load when one redeems their holdings before one year. Gold mutual funds allow for SIP investments whereas the same is quite cumbersome in gold ETFs.

Q. Which is better SIP or gold?

A. Gold is a relatively secure investment option that can be a hedge against inflation. Mutual funds, on the other hand, offer the advantage of compounding if you opt for a SIP and may deliver market-linked returns (depending on the type of fund).

Q. Should I buy gold mutual funds?

A. Gold is among the lowest risk-bearing assets. Most mutual funds invest in the stock market, which makes them riskier than gold investments. However, they are not as risky as direct stock market investments as they are professionally managed by expert fund managers.

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