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What Is Gold Mutual Fund, Should You Invest?

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Gold mutual funds are a type of commodity mutual funds or ETF (Exchange-Traded Fund) which invests in gold bullion or gold-producing enterprises. Physical gold bars and coins are examples of gold bullion.

 

If the fund invests largely in bullion or stocks and bonds of gold manufacturers and miners, the price of the shares inside these funds will be highly correlated to the spot price of gold. The goal of this fund is to generate profits from gold investments in a straightforward manner.

What Is Gold Mutual Fund, Should You Invest?

Gold funds may be an excellent investment instrument for anybody looking to secure their money against inflation or political unrest.

Benefits of investing in Gold Fund?

Gold Mutual Funds come with a number of benefits. Investors who do not have a Demat Account can invest in precious metals. Investing in Gold Mutual Funds provides investors with convenient access to the gold asset. Units of gold funds can be bought and sold at any time during business hours and from any location in the nation, and the difference in gold price is exempt from GST.

Investors can benefit from the potential value of gold without actually owning any physical gold. Gold funds can be used to protect against geopolitical insecurity and inflation. It's a simple approach to diversify your investment portfolio. Because gold prices do not fluctuate frequently, it is a safe investment alternative.

 


Gold ETFs make it simple to trade gold through a stockbroker or a fund manager. Because there is no entrance or exit procedure for purchasing units of gold funds, they are incredibly cost-effective. As a hedge against a declining currency, gold is a solid investment. Long-term capital gains can be realized by gold funds that have been subscribed to for longer than a year. These funds are also exempt from the wealth tax and the securities transaction tax. When borrowing money from a bank or a financial institution, you can use gold ETFs as collateral. There is no risk to the purity of gold ETFs because each unit is backed by pure gold prices.

Should You Invest?

In the current situation, the rising inflation and Russia-Ukraine Conflict have led to the sudden increase in gold prices around the globe making gold a good investment option. Since gold mutual funds invest in gold bullion, they are an excellent inflation hedge and good when the stock market is dropping.

Compared to physical gold investments, Gold Mutual Funds are less expensive and offer an investor the flexibility to purchase as low as one unit of gold. Furthermore, because the transaction would be made electronically, the investor will not have to worry about the gold's storage or security.

Gold ETFs continue to remain popular among investors. Gold funds and ETFs can help your portfolio weather adverse economic times by acting as a hedge. Because of its capacity to operate as an effective diversifier, gold serves as a strategic asset in an investor's portfolio.

Story first published: Tuesday, March 8, 2022, 13:04 [IST]
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