As an asset class, gold has several special characteristics. Required allocations can help to diversify and improve the efficiency of a portfolio. Gold is attractive to investors of all levels of experience because it is a reliable, visible, and long-term store of value that has traditionally moved independently of other properties. India is one of the world's largest gold consumers. Every year, nearly 8,00 tonnes of gold are imported. India is responsible for 23% of the world's overall annual gold production. Several other factors are driving the increase in gold demand, including its historical significance in our culture, industrial use, jewelry applications, and, perhaps most notably, investment in it. This Akshaya Tritiya invest in gold funds and diversify your portfolio.
What are Gold Funds?
Gold mutual funds are open-ended portfolios based on the gold Exchange Traded Fund's units. Since the underlying commodity is kept in the form of tangible gold, the price of this precious metal has a direct bearing on its value. Invest in these funds to construct a gold portfolio without having to purchase gold physically. These funds invest in Gold ETFs and offer the added benefit of avoiding the prices, risks, and liquidity issues associated with physical gold. Gold mutual funds are better in every way, with advantages such as low minimum investment amounts, diversification, no need for a Demat account, SIP growth, and so on. SIPs are a way to invest in gold funds. The fact that gold funds are managed by experienced fund managers is another factor that makes them a common and appealing option among investors. A gold fund's investors benefit from the knowledge of experienced fund managers, who make all of the fund's investment decisions based on their years of experience in the industry. Individuals can invest as low as Rs. 500, making these funds accessible to them. It gives an investor more options than buying physical gold, which can be very expensive.
Tax on Gold Funds
Gold mutual funds are taxed depending on the number of capital gains and the length of time they have been kept. If you keep the fund for less than three years, the capital gains will be taxed at your marginal tax rate. And, whether you've got the fund for at least three years, you'll have to pay tax on the capital gain at a rate of 20%, with indexation benefits.
|Gold Fund||Short Term -Less than 3 Years||Depending on the tax bracket of the investor|
|Gold Fund||Long Term - 3 Years and more||20% with indexation|
Best Gold Funds to invest in 2021
|Name of the Fund||3 Year Return|
|Axis Gold Fund||14.98%|
|Kotak Gold Fund||14.08%|
|SBI Gold Fund||14.02%|
|Nippon India Gold Savings||13.64%|
|Quantum Gold Savings Fund||13.58%|
|ICICI Prudential Regular Gold Savings Fund (FOF)||13.59%|
|Aditya Birla Sun Life Gold Fund||13.94%|
A gold fund, like other mutual funds, does not have outstanding returns. This is because, as the name implies, the underlying asset in a gold fund is gold, which appreciates in value only on an irregular or seasonal basis. It usually provides lower returns than other investment instruments at other times. Before investing in mutual funds, investors should read the offer papers, scheme goals, and performance reviews conducted by experts. Another crucial thing to note for any gold fund investor is that it is a hedge as well as an investment. Since gold is not affected by stock market fluctuations, it can be used to mitigate the risks associated with market-linked investment instruments.