After centuries of preoccupation with physical gold, we are suddenly spoilt for choice when it comes to digital and paper gold. Gold investments are agreements that result in the storage of gold against your name, often remotely. The introduction of gold as an underlying asset for fund schemes is one such example. Gold mutual funds and gold exchange-traded funds are investment instruments that are closely linked to the price of gold.
Gold ETF – Gold ETFs are open-ended fund schemes that can be traded in stock exchanges where they are listed. The underlying asset of gold ETFs is physical gold of 99.5% purity. A gold ETF is traded like shares in the stock exchange and is managed by a fund manager. It is essentially a commodity mutual fund with gold as the commodity. The fund manager tracks the gold price daily and does the trading necessary to get the best gold ETF return.
Gold Mutual Funds – These invest in gold ETFs and their return is based on the performance of the underlying gold ETF(s). Change in the NAV of the gold fund would move as per the performance of the gold ETFs in which it has invested.
Gold ETF vs Gold mutual fund
| Criteria | Gold ETF | Gold Fund |
| Demat account | Demat account is required to invest in gold ETF. | No demat account is required to invest in gold funds. |
| Underlying asset | Gold ETF holds physical gold for the amount invested in it. | Gold funds hold gold ETF units, generally in a gold ETF issued by the same asset management company. |
| SIP | You cannot invest in gold ETF through SIP. | Investment in a gold fund is possible through SIPs. |
| Liquidity | There are no exit loads in the case of gold ETFs. Being listed on a stock exchange, you can buy or sell ETF units during market hours without any restriction. | Gold mutual funds have an exit load, generally for a year. Its units cannot be traded in the market. |
| Minimum investment | The minimum investment in gold ETF is one gram of gold. The exact amount would depend on the gold price on the day of your investment. | A gold SIP can be started with a minimum investment of Rs. 1,000. |
| Delivery of gold | Your units of gold ETF can be converted to gold. You can take possession of the physical gold against these units. | With gold funds, you don’t have the option of physical possession of the gold. |
Gold mutual funds India has seen a steady rise in popularity, while gold ETF prices has seen rapid growth in the last few years, particularly in 2020. With the help of online apps like the moneyfy app, you can invest in India’s best gold mutual fund schemes and ETFs and step into the world of online gold investments.
