What are gold savings funds?

Gold savings fund in simply a mutual fund that invest in Gold ETFs. These funds don’t invest on physical gold directly but through Gold ETFs.

Characteristics of Gold savings fund:

• Owing of demat account is not required.
• Have an advantage of investing through systematic investment plan(SIP) based on needs and requirements.
• These funds can only be purchases from fund house at the NAV price, fixed at the end of trading day.
• Skill fund manager helps with the investment. Hence, no proper knowledge of fund is needed to invest.
• For Gold savings fund, minimum investment required in 5000.
• These funds have some upfront commissions payable to fund manager.

Investing gold savings funds are better option than investing in physical gold. Physical gold is best for immediate personal use not for investment. Some of the advantages of investing in gold savings fund rather than investing in physical gold are:

• Buying gold savings fund is hassle-free as compared to physical gold with no risk on purity of gold.
• Gold funds have more liquidity
• Physical gold attracts various taxes like wealth tax and VAT.
• No storage problem with Gold savings fund. With physical gold there is a risk of theft.

So, based on your personal investment style, strategy and goals, include them in your investment portfolio. However, if you think you lack skill to invest in gold yourself, then Gold Savings Funds are better way to invest in gold.

Investing I gold asset class is safe because:

• Gold has proven as safe heaven for many investors for centuries as the performed well in all adversaries such as war or global market.
• Gold can be easily bought and sold.
• Gold is the best alternative to currency.

Few examples of Gold savings fund are:

ICICI Prudential Regular Gold Savings Fund

Reliance Gold Savings Fund 

Quantum Gold Savings Fund

Happy Investing!

Gold savings funds are the funds that invest money in Gold ETFs (Gold Exchange Traded Fund) which then invests directly into gold. Gold ETFs track gold prices daily and help us to get returns by investment in physical gold.

• Gold savings funds do not invest directly into gold
• As Gold savings funds take Gold ETFs as their avenue for investment in gold, they come with higher charges
• For a new investor, investing in gold savings funds using an SIP (Systematic Investment Plan) is a good option
• Minimum amount for these funds is ₹ 5000 (lump sum) and an additional purchase of ₹1000 can be made and it can go above ₹1000 per month in case of SIP
• Gold savings funds bear exit load on retrieval
• These funds cannot be traded in the market

Certainly gold savings funds are better than physical gold if you are considering gold as an investment avenue. Following points state the advantages of gold savings funds over physical gold:

• Buying gold is a cumbersome process which includes checking of hallmark and related purity certificates
• Resale value of physical gold when sold to jewellers is about 2-3% lower than the market rate
• Wealth tax is an additional cost incurred when you hold physical gold
• Opening and managing your bank account to store gold is a tiring process which involves even the risk of theft

Examples of Gold savings funds include: Reliance Gold Savings Funds, ICICI Prudential Gold Savings Funds

Click here to know more about gold savings funds.

Gold savings funds are mutual funds that invest in gold Exchange Traded Funds (ETFs) instead of regular ETFs. These funds do not directly invest in gold and hence are different from gold ETFs.

The following points should be considered before investing in a gold savings fund:

• Regular, disciplined manner of investment
• Demat account not required
• Generally have higher charges than gold ETFs
• Minimum initial investment of Rs.5000 in lump sum is required
• Purchases of minimum Rs.1000/month is necessary for 6 months in case of SIP
• Do not have an entry load
• Generally no exit load after 1 year of investment
• Gold savings funds are not tradable in the market

Gold is considered to be the most common form of investment in India. One can invest in gold in the following forms:

·        Gold ETFs

·        Sovereign Gold bonds(SGBs)

·        Physical form such gold coins, gold bars or jewelry

Gold exchange-traded products are traded on the major stock exchanges including Zurich, Mumbai, London, Paris and New York. It tracks the prices of gold . Like most commodities, the price of gold is driven by supply and demand, including speculative demand. However, unlike most other commodities, saving and disposal play larger roles in affecting its price than its consumption. So a lot of speculation goes into determining the price of gold and ETFs of gold depend mainly on the derivatives of gold(underlying commodity for determining price is gold).

Entry Load: It is nil in most of the gold savings fund.

Exit Load: It's applicable depending on the duration the amount is redeemed(almost in the range of 1-2% of NAV)

Typically a commission of 0.4% is charged for trading in gold ETFs and an annual storage fee is charged.

Rather than saving the gold in the form of physical assets it's better to invest in a good savings fund, because in long term it can give you more returns as compared to the physical savings.

Comparison of the two forms of savings:

In addition to this short term and long term capital gain tax are similar in both cases.

So as you've seen it's better to invest in gold savings fund, rather than saving in physical form of gold.