Sign In

For Suspension of fresh subscription in certain schemes of NIMF, kindly refer to ADDENDUM

​Gold Mutual Funds​

Asset class
All
Category
All
RISK PROFILE
All

Nippon India Gold Savings FundAn Open Ended Fund of Fund Scheme- Growth Plan Growth Option

Latest NAV

28.6948 15-Jul-2024

View Details Invest Now
Fund NameLatest NAVActionCompare/Track
Nippon India Gold Savings Fund An Open Ended Fund of Fund Scheme - Growth Plan Growth Option 28.6948 15-Jul-2024 Invest Now

What are Gold Mutual Funds?

Simply put, gold mutual funds invest in gold indirectly. A Gold Mutual Fund is an open-ended fund of fund, mutual fund scheme that invests in Gold s. Gold ETFs is an exchange-traded fund that tracks the domestic physical price of gold. These are investments that mirror the gold prices and invest in gold bullion. With a gold fund, you can benefit from investing in a gold ETF without having a Demat account and leveraging a fund manager’s expertise. 

Gold as an underlying asset has benefits that every investor in India is well versed with. Hence a gold mutual fund offers the convenience of mutual funds and the benefits of gold, like liquidity, value and hedge against inflation, in a single investment. So, an investor can opt for a *  Systematic Investment Plan option and invest in the gold fund, which will invest in Gold ETFs.

How do Gold Mutual Funds work?

A mutual fund pools all investors' money and invests in a particular asset, in this case, the gold ETFs. These ETFs trade the gold bullion on the stock exchange. The ETFs represent gold in terms of units; these are listed on the stock exchange, and investors trade on them. So indirectly, the investors are buying and selling gold.  So how do gold funds earn returns? Like any other mutual fund, in the case of gold mutual funds too, the returns are generated by the movement in the price of the underlying asset. So as gold prices that are influenced by global gold prices, duties, and exchange rates vary, the gold ETF prices move, and in turn, the NAV of the mutual fund also changes. So when an investor invests, the units will be allocated at the current price of gold, and when the investment is redeemed, it will be at the prevailing price. The investor will make capital gains depending on the movement of gold prices. So now we know what gold funds are and how they work.

How to invest in Gold Mutual Funds?

Investing in gold mutual funds is simple and quick. Unlike the challenges inherent to buying or selling gold, investing in gold funds is easy and convenient. Investment in gold funds can be made through various methods: 

  • Directly through the AMC 
  • Through a financial advisor
  • Through a distributor
  • An investor can also invest in gold funds by submitting the duly completed form attached with a cheque or draft at the office of designated Investor Service centres (ISC)/ Registrar & Transfer Agents (RTA) of mutual funds

The investor needs to be KYC compliant irrespective of the method chosen. If the investor invests through an advisor or broker, they will ensure the submission of duly completed forms and supporting documents. If the investor opts for the online option, the investor must complete the KYC process online and create an account to transact. 

The investor can select the gold funds to invest in and invest directly in them. Gold funds can be invested through periodic investments called SIP, lumpsum, or both. Nippon India offers multiple channels for investors to invest by SMS, Mobile apps, website, and physical form. The process is simple and secure as the One Time Passwords (OTPs) are sent to the investor's registered email address and mobile number. Even payment options are many to ensure maximum convenience for the investor.

What are the benefits of investing in Gold Funds?

Gold as an asset has always been a store of value. Although it is no longer a currency, it still offers liquidity and value. So investing in gold funds has the following benefits:

  • With gold funds, as an investor you can start small. With the Systematic Investment Plan (SIP)+. There are no storage costs or fear of theft compared to physical gold.
  • Mutual funds inculcate the habit of saving, and gold funds are no exception. With SIP an investor can save a certain sum of money periodically. This habit of saving leads to periodic investments, which derive compounding benefits.
  • Gold funds mean that you indirectly buy gold that will stand the test of time and has been shown to fetch returns. Gold as an asset is a store of value.
  • Gold funds are portfolio diversifiers and provide a cushion against market movements. Gold and equity are inversely correlated; hence, historically it is observed that gold may rise whenever equity falls.
  • Gold fund may provide a hedge against inflation.. Rise in gold prices can help in beating inflation.
  • Gold Funds are professionally managed by a Fund Manager who devises strategies to meet the fund’s goals. An investor does not have to monitor gold prices continuously.
  • Gold funds can prove to be cost-effective as there are no making or storage costs involved in this form of investment in gold compared to the physical form of gold.
  • SIPs in gold funds can be redeemed easily without restriction on the redemption amount. Also, the investor does not incur a penalty for premature withdrawal.
  • With gold mutual funds, an investor can benefit from rupee averaging as reduced gold prices would mean buying more units for an X amount, and rising prices would mean buying fewer units for the same amount. Thus, the benefit of a reduced average cost is available to an investor.

Gold Mutual Fund Taxation

Long-term Capital Gains

Long-term capital gain is attracted in respect of units, held for a period of more than 36 months.

  • Long-term capital gains will be chargeable to tax under section 112 of the Act, at the rate of 20 % with indexation benefits. In case of resident individuals and HUFs, where the total income as reduced by capital gains, is below the basic exemption limit, the long-term capital gains will be reduced to the extent of the shortfall and only the balance long-term capital gains will be subjected to the 20 % tax with indexation benefit.
  • For tax on long-term capital gains in case of non-residents investors are followings Listed Securities @ 20% with indexation benefits. Unlisted Securities @ 10% without indexation and foreign currency fluctuation benefits

Short-term Capital Gains

Short-term capital gain is attracted in respect of units held for less than 36 months.

  • Short term capital gain is added to the total income of the assessee and taxed at the applicable slab rates specified by the Act.

Things to consider while investing in Gold Funds

While Gold Mutual Funds can be of value in an investor's portfolio, every investor must consider a few factors before investing in Gold Funds. 

  • Investment Goals: Every investment must align with the investor’s financial goals. Gold fund returns alone will not be enough to meet a long-term goal, but it can be good as a provision for a celebration like a marriage in the near future. Hence the goals and expectations from the investment must be clearly defined.
  • Risk appetite: Gold funds come with lower risk; hence, if the investor is conservative and low-risk is prioritised, investment in gold funds can be higher. 
  • Costs and tax payments: Costs in the form of the expense ratio and entry and exit load must be considered. Tax attracted on redemption must also be kept in mind. A comparison between all the forms of gold investments must be made. 
  • Logical Decision: Investing in Gold funds must be a logical decision, and the decision to invest must be reviewed. Since the underlying asset is gold, sentiments must be kept at bay. 
  • Returns: Gold funds do not generate returns in the form of dividends or interest, so this must be considered while investing in gold funds.
  • Portfolio Diversification: Gold funds may perform well in times of market depression; however, they cannot be used as the only option for wealth creation. Gold funds must be included in the portfolio to cushion the market fluctuations of equity and help to diversify the portfolio.

Gold investment has been around for centuries and will continue to be. It has been a part of celebrations and inheritance. But when it is considered an investment, it must be done tactfully. Invest prudently, take advantage of market fluctuations and define the purpose of the investment so that redemption can be planned. 

FAQs

1. What are Gold Funds?

Gold funds are mutual funds that invest in gold ETFs. Gold ETFs trade on gold bullion on the stock market. A Demat account is necessary to trade in Gold ETF, but no Demat Account is required to invest in Gold Funds. Gold ETFs mirror the price of physical gold; hence, investment in gold funds also varies based on gold prices.

2. How do gold funds work?

Gold Funds invest the pool of money in gold ETFs. Gold ETFs are exchange-traded funds that invest in 99.5% gold bullion. The units of the ETF represent physical gold. The movement in gold prices determines the NAV of the gold mutual fund. When an investor invests at a lower price and redeems at a higher price, returns are generated. No other returns in the form of interest or dividends are available to the investor.

3. What is the difference between Gold Mutual Funds and Gold ETFs?

Gold Mutual funds and Gold ETFs both invest in Gold. But the main difference between the two is that gold mutual funds do not require a Demat account, they act as fund of fund and gold ETFs need a Demat account as they are traded on the exchange. Gold Mutual Funds are professionally managed, and hence small investors can benefit from the expertise of a professionally managed fund. Gold ETFs require regular tracking and basic knowledge of the stock market.

4. How to invest in Gold Funds?

Investing in Gold funds is like other mutual funds. It is simple and quick. Investors can invest directly on the AMC Asset Management Companies website or through an advisor/distributor. There is an option to invest online through the website, send an SMS, place the purchase request on a call through a call centre or even download the app, register, and invest. Nippon India offers all these modes to ensure maximum convenience to the investor. The investor can also buy the application form physically and invest.

With convenience, these modes also provide security as the transactions are authorised by the OTP received on the registered mobile and email id of the investor. Investment can be made through SIP or lumpsum, or both.

5. How do I start a SIP in a Gold fund?

To start a SIP, the investor must be KYC compliant and decide on the amount, period, type of plan, redemption or payout. Once all this is decided, the investor must decide to invest online or offline. With Nippon India Gold Savings Fund , you can start a SIP with a minimum amount of Rs.100 +. You can start a SIP online and offline. For the online option, go to https://mf.nipponindiaim.com/transact-online/transact and follow the simple steps to start SIP. An existing customer can log in, select the fund and other details and invest. A new customer can opt for a guest login and invest. For the guest log-in, you require your PAN No. Once you log in, you can select the fund and input all details like amount, period, type of plan, redemption, or payout, fill in bank details and process the transaction. For the offline mode, the investor will have to get the form duly filled out and submit the required documents at the office of the advisor/AMC/distributor/RTA.

6. Can a lump sum investment be made in Gold Funds?

Nippon Gold Funds offers convenience through various options and the power to choose. You can invest a lump sum in the Nippon India Gold Savings Fund. Investing in lumpsum can later be routed to different funds through the STP mode. Gold Funds also give an option for lumpsum and SIP together.

7. What are the benefits of investing in Gold funds?

Gold Funds have cumulative benefits from Mutual funds and Gold. Gold as an asset has most of the times provided returns; it is liquid and is an essential portfolio diversifier. Mutual funds, on the other hand, provide the benefit of small investments invested periodically to a professionally managed fund. So, gold funds have all of these benefits. Gold mutual funds offer the option of small investments through SIP to buy gold, an asset that is a portfolio diversifier, hedges inflation and cushions against market fluctuations.

8. Do Gold funds have a lock-in period?

Nippon India Gold Savings Fund is an open-ended mutual fund. Hence an investor can invest any time and redeem anytime. There is no compulsion to stay invested for a certain number of years. However, since the underlying asset is gold which will provide returns if invested for a long duration, an investor may want to invest in Gold Funds if they are looking for long-term growth.

9. Are gold funds tax-free?

Gold funds are considered as debt mutual funds for taxation purposes. The capital gains tax is attracted based on the tenure of holding the investment. If the investment is held for less than three years, then short-term capital gains tax at normal tax rates will have to be paid. If the tenure exceeds three years, a long-term capital gains tax of 20% with indexation benefit.

10. Where do Gold Mutual Funds invest?

Gold Mutual Funds invest in Golf ETFs Gold ETFs are exchange-traded funds that invest in 99.5% gold bullion. ETFs mirror the price of physical gold and generate returns based on the movement in gold prices.

11. How to withdraw money from gold funds?

Withdrawal from Gold Funds can be made through both online and offline modes and through various channels:

  • Through broker - If you have invested through a broker, you can submit the withdrawal request form and submit it offline, or you can withdraw through the website or mobile app.
  • If you use DEMAT and Trading accounts, you can withdraw through them.
  • If you have invested through the AMC, you can withdraw through it.  Nippon India Mutual Fund offers online and offline options for withdrawal. Like investing, you can process a redemption request online by logging into your account or through the mobile app. The redemption request can also be made offline through the branch.
  • You can also make a withdrawal request to the Registrar and Transfer Agent.

*SIP stands for Systematic Investment Plan, wherein you can regularly invest a fixed amount at periodical intervals and aim for better benefits over a period of time through the power of compounding.

+The minimum SIP amount may differ from scheme to scheme subject to respective Scheme Information Document.

The information herein is meant only for general reading purposes and the views being expressed only constitute opinions and therefore cannot be considered as guidelines, recommendations or as a professional guide for the readers. The document has been prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable. The sponsor, the Investment Manager, the Trustee or any of their directors, employees, associates or representatives (“entities & their associates”) do not assume any responsibility for, or warrant the accuracy, completeness, adequacy and reliability of such information. Recipients of this information are advised to rely on their own analysis, interpretations & investigations. Readers are also advised to seek independent professional advice in order to arrive at an informed investment decision. Entities & their affiliates including persons involved in the preparation or issuance of this material shall not be liable in any way for any direct, indirect, special, incidental, consequential, punitive or exemplary damages, including on account of lost profits arising from the information contained in this material. Recipient alone shall be fully responsible for any decision taken on the basis of this document.

 MUTUAL FUND INVESTMENTS ARE SUBJECT TO MARKET RISKS, READ ALL SCHEME RELATED DOCUMENTS CAREFULLY.

Gold Fund

Get the app