Gold Mutual Funds; October 2024 has seen gold and silver prices hit new all-time highs, leaving early investors celebrating. With Dhanteras and Diwali around the corner, the festive season like always, sparks an impetus into gold buying. But should you head to your jeweller for physical gold—or consider the smarter route with gold mutual funds?

Let’s understand how gold mutual funds can add a glittering edge to your portfolio this festive season.Pune Stock

Why are gold prices climbing—and will they stay high?

The surge in gold prices isn’t randomAhmedabad Wealth Management. Global geopolitical tensions, including the Russia-Ukraine war and the threat of further escalation in the Israel-Iran conflict, have created economic uncertainty. Rising crude prices and the inflation fears they bring have pushed investors to take shelter in gold—a time-tested “safe haven” asset.

In addition, central banks in countries like China and India are increasing their gold reserves, further boosting prices. With these uncertainties likely to persist, gold could remain a valuable asset to own.

How much should you hold in a gold mutual fund as part of your portfolio?

Mutual funds are a great way to invest in any asset class as they are easier to invest in and suit every investor’s unique requirements. "If one is looking at investing in gold, gold mutual funds can serve the purpose as they would come with inherent advantages of low storage cost, transparency, and affordability when investing via the ‘SIP’ route," says Mayank Bhatnagar, Co-founder and COO, FinEdge

Smart investing is all about goal orientation and asset allocation. "A balanced portfolio spreads investments across asset classes—equity mutual funds for growth, fixed income or Debt funds for stability and gold as a hedge during uncertain times. While equity should make up the lion’s share of your long-term portfolio, allocating around 10% to gold can serve as an excellent hedge against inflation and market volatility," adds Bhatnagar.

5 reasons why you can opt for gold mutual funds this Dhanteras

1. Start small with SIPs: Gold mutual funds allow you to invest systematically through a SIP (Systematic Investment Plan), helping you average out your purchase cost over time. This makes it easier to build your gold holdings steadily without needing a lump sum.

2. Low minimum investment: You can start investing in gold mutual funds with as little as Rs. 1,000/-. This flexibility ensures you don’t have to stretch your budget to begin investing.

3. No storage hassles: With gold mutual funds, the AMC buys and stores the physical gold on your behalf. You won’t need to rent a locker or worry about insurance costs for safekeeping.

4. Easy buying and selling: Purchasing or redeeming gold mutual fund units is seamless—just a few clicks, and your transactions are done. Your bank account is directly debited or credited, ensuring hassle-free liquidity when you need it.

5. Tax advantage: Investing in a gold mutual fund can turn out to be more tax-efficient than investing in physical gold.

While Gold is a symbol of age old tradition and has many cultural references, it is important to understand that wealth creation is a more scientific process driven by a highly customised approach towards investing. "One must keep in mind that long term wealth creation requires you to allocate resources to the right investment class and hence, a detailed investment plan is critical before you commit to an asset like gold. Finally, Invest smart by making correct decisions that are aligned to achieve your financial goals," says Bhatnagar.