Gold mutual funds offer an accessible way to invest in gold by pooling investor capital into gold Exchange-Traded Funds (ETFs). These ETFs, regulated by SEBI, invest exclusively in physical gold and approved gold-related instruments.
Pros :
Diversification: They provide portfolio diversification, as gold often moves inversely to assets like stocks and real estate, making it a safe-haven during market instability.
Convenience: Gold mutual funds avoid the issues of physical gold investments, such as safety concerns and making charges, simplifying the investment process.
Liquidity: Units can be redeemed anytime without a lock-in period, with cash typically available within a week.
Lower Costs: They have lower expense ratios compared to the costs of purchasing and storing physical gold, avoiding additional fees and taxes.
Professional Management: Managed by experts, these funds aim to optimize returns through strategic asset allocation and market timing.
Cons:
Underperformance: Historically, gold has underperformed compared to major stock indices like the Sensex and Nifty in recent years.
Regulatory Uncertainty: Changes in regulations, such as customs duty adjustments, can impact gold prices and introduce volatility.
Price Fluctuation: Gold prices are influenced by global market fluctuations and geopolitical events, affecting fund performance.
Gold mutual funds offer a practical, professionally managed way to invest in gold but come with risks related to price volatility and regulatory changes.
