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What are gold funds? What are its benefits?

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Gold funds are funds that invest in gold through Gold Exchange Traded Funds (Gold ETFs) or Gold Fund of Funds (Gold FoFs). Gold ETFs are passive investment instruments that are based on gold prices and invest in gold bullion. Having an investment in Gold FoFs, therefore provides an indirect exposure to the physical gold investments in an electronic form. Thereby, the investors can avail the similar benefit as invested in physical gold as an asset.

What are the Benefits of Investing in Gold FoFs?

There are many reasons why gold funds form an integral part of an investor’s portfolio. Here are some benefits of investing in Gold FoFs:

No Storage Issues:

Investing in physical gold becomes an issue when it comes to its safety. You need to store your gold bars, coins or jewellery in a safe place like a bank’s locker, or a safe at home. If you choose to store it in a bank, you are required to pay storage-related costs. Physical gold also might lose its shine over time due to storage issues, thereby decreasing in value. These problems do not occur with Gold FoFs, as funds are electronic investments. However, investors will be bearing the recurring expenses of the scheme, in addition to the expenses of underlying scheme in which Gold FoFs invests.

Allows Investors to Start Small:

One can invest as little as Rs 500 in a gold funds as a lump sum or SIP. This makes investing in GOLD FOFs more convenient than physical gold. It also defeats the notion that one needs to have a large sum of money to buy or invest in gold.

Comparatively Less Volatile:

Whenever there is an economic crisis, the market fluctuates, and stocks are the first to be affected. With the ongoing pandemic, stocks may underperform for the next few months. During such times investing in gold through Gold FoFs could be a good idea. Gold FoFs could serve as a good hedge against the equity market volatility. Historically, when stocks have gone down, the prices of gold have moved up. Hence, investing in gold through funds is likely to balance out any volatility in equity investments.
Please note: Past performance is neither an indicator nor a guarantee of future performance.

Portfolio Diversification:

Among the golden rules of investing is to avoid putting all of one’s eggs in the same basket. A diverse portfolio can weather an economic storm better than a simple one. With different kinds of assets that do well during different economic conditions, you are likely to receive some form of steady growth. For instance, generally when stocks go down, gold rises, thereby mitigating your risk.

No Demat Account Necessary:

Afraid there will be the added costs of maintaining and opening a Demat account to invest in Gold FoFs? Luckily, since Gold FoFs are mutual funds, you can easily invest in them without ever having to open a Demat account to do so. This makes them convenient and accessible to more people. A demat account is only necessary when you are investing or trading Gold ETFs on the stock exchange.

Liquidity Benefits:

Gold is often selected as an investment option because it is a highly liquid commodity, and so are Gold FoFs. In fact, compared to any other asset, liquidating gold is the quickest and easiest in India. If there is an urgency of cash, having highly liquid investments in the form of Gold FoFs could be in your best interest as they can be easily converted to cash once redeemed. The benefit of liquidating Gold FoFs over physical gold is that you have flexibility in the amount you want to convert to cash.

In conclusion, Gold FoFs are a highly popular way to diversify one’s portfolio by serving as a hedge during volatile market behavior. Gold Fofs can be considered superior to physical gold in terms of storage benefits, and ease of use. You may want to consider investing in Nippon India Gold Savings fund as per your risk appetite and financial goals.

​​Product​ Label
​​This product is suitable for investors who are seeking*: Riskometer
    • long term capital growth• returns that are communsurate with the prfomance of Nippon India ETF Gold BeES through investment in securities of Nippon India ETF Gold BeES

• Investors should consult thier financial advisors if in doubt about whether the product is suitable for them.
​​Product​ Label
​​This product is suitable for investors who are seeking*: Riskometer
    • Portfolio diversification through asset allocation.• Investment in physical gold

• Investors should consult thier financial advisors if in doubt about whether the product is suitable for them.

Mutual Fund investments are subject to market risks, read the scheme related documents carefully.


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