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Gold ETF Vs Equity Mutual Fund: Why Should You Diversify Portfolio With Gold ETF?

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If you are seeking a good investment choice to generate meaningful returns for achieving your long-term goals, the first thing that springs to mind is a mutual fund with strong returns, particularly large-cap equities mutual funds.

 

If you want to diversify your investment or invest in gold, Gold ETFs are a great alternative you might consider if you want to earn larger returns than mutual funds. Their returns and performance are linked with the gold price.

The Gold Price Influence

The Gold Price Influence

Since last 2 years, the gold price has seen tremendous growth. In 2020, after beginning the year on a bright note owing to the pandemic, the price of gold fluctuated throughout the year. With gold functioning as a haven for investors, demand for the precious metal grew, as did its price. The stock market struggled throughout the epidemic, but it began to rebound around the end of 2020 when the price of gold fell somewhat. 

The current Russia-Ukraine crisis, followed by a Western ban on Russian oil imports, also had an impact on the gold price, which rose to a new high. The data shows that the gold price trend has generally been on the rise, with the exception of a few lows between certain years, providing credence to the claim that gold is a secure investment over extended periods of time.

 Gold ETF
 

Gold ETF

Gold ETFs have grown in popularity among investors in recent years. Investors choose to invest in gold ETFs because they monitor gold prices and avoid the need for storage. However, when it comes to investing, many investors are unsure whether they should diversify their portfolios beyond Equity Mutual Funds. Don't get confused between Gold Mutual Fund and Gold ETF. Gold Mutual Funds are a type of Gold ETF that invests in gold. These are funds that invest primarily in gold ETFs and other gold-related assets. Although Gold Mutual Funds do not invest directly in actual gold, they do so indirectly through Gold ETFs.

Gold ETF and Large Cap Equity Mutual Fund - 1 Year Returns Compared

Gold ETF and Large Cap Equity Mutual Fund - 1 Year Returns Compared

Top Performing Gold ETF

Gold ETFReturns
IDBI Gold ETF22.60%
Invesco India Gold ETF22.20%
SBI ETF Gold22.06%

Top Performing Large Cap Equity Mutual Fund

Equity Mutual FundReturns
IDBI India Top 100 Equity Fund - Direct Plan - Growth13.26%
Invesco India Largecap Fund - Direct Plan - Growth13.16%
ICICI Prudential Bluechip Fund - Direct Plan - Growth11.00%

 

Why should you Diversify your investment with Gold ETF?

Why should you Diversify your investment with Gold ETF?

Data shows that in the last year the price of gold has surged to a record high, and in the last month, the price of gold has surged almost 15% making Gold ETF a much check investment option for investors. 

Gold has the ability to keep its value even in the most difficult of circumstances, making it a superb hedge and helping to safeguard your portfolio from inflation and global dangers.

Gold ETFs are gold-price-based passive investment options. They are less costly than real gold investments, and they allow an investor to buy as little as one unit of gold. Additionally, because the transaction would be made in electronic form, the investor will not have to worry about the gold's storage or security.

Gold ETFs are a handy and cost-effective way to gain exposure to the yellow metal, which is a safe haven and an asset, if you're aiming to construct a well-rounded portfolio or simply want to amass gold units.

Diversifying your investment with a gold ETF will help you to survive the equity market turbulence. This implies that your stock market investment does not go totally into one firm or a specific sort of company, since if that company loses money, your entire investment is at danger. According to experts, at least 10% of your investment should in gold products such as ETF. 

Story first published: Wednesday, March 9, 2022, 13:58 [IST]
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