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How to Invest in SIP A Beginner's Guide
In summary
Gold mutual funds are open-ended schemes that generally invest in units of an underlying gold Exchange-Traded Fund (ETF). Their returns largely depend on movements in domestic gold prices, after accounting for scheme expenses and tracking differences. The main points to know are:
- Gold funds provide indirect gold exposure
- Most schemes invest through gold ETFs
- Demat accounts are generally not required
- SIP and lumpsum options are available
- Gold prices can rise or fall
- Costs differ across individual gold schemes
- Tax depends on your holding period
There is no single “best” gold mutual fund for every investor. Compare the underlying ETF, total costs, tracking efficiency, Riskometer, exit load, and minimum investment before choosing a scheme.
What are gold mutual funds?
Gold mutual funds are open-ended mutual fund schemes that generally invest most of their money in units of a gold Exchange-Traded Fund (ETF).
A gold ETF aims to track domestic gold prices and generally invests in physical gold of the prescribed purity, along with permitted gold-related or liquidity instruments.
When you invest in a gold mutual fund, you buy units of the fund rather than physical gold. This means you do not need to worry about storing gold or checking its purity.
However, gold mutual funds still carry investment risk. Their value can rise or fall with gold prices, and returns can also be affected by expenses and tracking differences.
Which gold mutual funds can you compare?
There is no SEBI-defined ranking called “top gold mutual funds”. A fund that suits one investor may not suit another.
The following are established gold Fund of Fund schemes available in India that you can compare. This is not a ranking or investment recommendation.
| Gold mutual fund | Main underlying exposure | What to check |
| HDFC Gold ETF Fund of Fund | HDFC Gold ETF | costs and tracking |
| Kotak Gold Fund | Kotak Gold ETF | expenses and exit load |
| Axis Gold Fund | Axis Gold ETF | tracking and minimum amount |
| UTI Gold ETF Fund of Fund | UTI Gold ETF | costs and portfolio |
| Aditya Birla Sun Life Gold Fund | ABSL Gold ETF | underlying ETF expenses |
| Nippon India Gold Savings Fund | Nippon India ETF Gold BeES | tracking and scheme terms |
| Quantum Gold ETF FoF | Quantum Gold ETF | expenses and tracking |
| Tata Gold ETF Fund of Fund | Tata Gold ETF | exit load and costs |
Current scheme information confirms these products continue to provide gold exposure through their respective underlying ETFs.
Scheme details can change. Check the latest Scheme Information Document (SID), Key Information Memorandum (KIM), and factsheet before investing.
Why might you consider gold mutual funds?
Gold mutual funds can help you add a different asset class to a portfolio containing equity, debt, or other investments.
Important benefits include:
- No physical storage: You do not store coins or bars
- No purity check: Underlying ETF follows regulatory requirements
- SIP investing: Eligible schemes allow periodic investments
- Lumpsum option: You can invest a larger amount together
- No Demat requirement: Fund of Fund units can be held without one
- Daily NAV: Scheme NAV is disclosed regularly
- Portfolio diversification: Gold may behave differently from other assets
Gold can sometimes perform differently from equity and debt during market stress, currency movements, inflation changes, or geopolitical events. However, this relationship is not fixed, and gold can decline when other asset classes also fall. Therefore, gold should not automatically be treated as protection against every market event.
How do gold mutual funds make or lose money?
Your return mainly depends on changes in gold prices, less the effect of expenses and tracking differences.
Suppose Ravi invests Rs. 50,000 in a gold mutual fund when the NAV is Rs. 25.
He receives:
Rs. 50,000 ÷ Rs. 25 = 2,000 units
If the NAV later rises to Rs. 27, the value becomes:
2,000 × Rs. 27 = Rs. 54,000
The illustrative gain is Rs. 4,000 before applicable taxes or other charges.
If the NAV instead falls to Rs. 23, the investment value becomes Rs. 46,000.
This example shows why gold mutual funds should not be described as guaranteed or capital-protection investments.
What should you compare before investing?
Do not select a gold fund only because it delivered the highest recent return.
Since gold mutual funds generally invest in an underlying gold ETF, their returns may be similar over time. Costs and tracking quality can therefore matter.
Check these factors:
- Underlying ETF: Know where the fund invests
- Tracking difference: Compare performance with domestic gold
- Expense ratio: Higher costs can reduce your return
- Underlying costs: FoF investors also bear underlying scheme expenses
- Exit load: Check charges for early redemption
- Riskometer: Understand the scheme's current risk classification
- Minimum investment: Check SIP and lumpsum requirements
- Fund size: Use AUM as context, not quality proof
What risks do gold mutual funds have?
Gold mutual funds remove some problems associated with physically holding gold, but they do not remove investment risk.
Important risks include:
- Gold price risk: Gold prices can fall
- Currency risk: Domestic prices reflect global and currency factors
- Tracking risk: Scheme returns can differ from gold
- Cost risk: FoF and ETF expenses reduce returns
- Concentration risk: Your exposure remains centred on gold
- Liquidity risk: Exceptional conditions can affect redemption
- Market risk: Investor sentiment can cause price swings
You should also check the latest Riskometer instead of assuming that gold is a low-risk investment.
Who can consider gold mutual funds?
Gold mutual funds may suit investors who want some portfolio exposure to gold without physically holding the metal. You may consider them if you:
- Want diversification: Your portfolio is concentrated elsewhere
- Prefer digital investing: You do not want physical gold
- Want an SIP: You prefer gradual investing
- Lack a Demat account: You prefer mutual fund units
- Accept price fluctuations: You understand gold can decline
Gold mutual funds should not automatically become the largest part of your portfolio simply because gold has recently performed well.
Your allocation should reflect your financial goals, investment horizon, existing assets, and ability to handle price movements.
Conclusion
Gold mutual funds provide a way to invest in gold without buying or storing the physical metal. Most schemes achieve this by investing in an underlying gold ETF, so their performance is closely linked to domestic gold prices after expenses and tracking differences.
Before choosing among the top gold mutual funds, compare the underlying ETF, costs, tracking quality, exit load, Riskometer, and minimum investment. Gold can support portfolio diversification, but its price can also fall. Choose your allocation based on your goals rather than recent gold returns.
Last reviewed: October, 2026
Mutual funds are subject to market risk. Please read the scheme-related documents carefully before investing.
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Frequently Asked Questions
Gold mutual funds and ETFs
Taxation and investment amount
Suitability of gold funds
How do gold mutual funds differ from gold ETFs?
Gold mutual funds generally invest in units of a gold ETF and can normally be purchased without a Demat account. Gold ETFs trade on stock exchanges and generally require Demat and trading accounts. Gold mutual funds can also support SIP investing, but investors bear the expenses of the Fund of Fund as well as the underlying ETF, subject to applicable limits.
What is gold mutual fund taxation?
Under the current 2026 framework, gold mutual funds investing mainly through gold ETFs generally fall outside the debt-focused “specified mutual fund” definition. Units held for up to 24 months are generally treated as short-term, while units held for more than 24 months can qualify as long-term. Long-term gains are generally taxed at 12.5% without indexation, subject to applicable tax rules.
investments from Rs. 100 or even lower, while others can have different minimums. On the Bajaj Broking website, SIPs start from Rs. 100 per month for eligible schemes.
What is the minimum investment for gold mutual funds?
There is no single minimum amount for all gold mutual funds. Each scheme decides its minimum SIP and lumpsum investment. Some current schemes allow investments from Rs. 100 or even lower, while others can have different minimums. On the Bajaj Broking website, SIPs start from Rs. 100 per month for eligible schemes.
Is investing in gold mutual funds a good idea?
Gold mutual funds can be useful if you want portfolio diversification and gold exposure without holding physical gold. However, whether they suit you depends on your goals, investment horizon, existing portfolio, and risk tolerance. Gold prices can rise or fall, and mutual fund returns are not guaranteed.
Disclaimer
Bajaj Finance Limited ("BFL") is registered with the Association of Mutual Funds in India ("AMFI") as a distributor of third party Mutual Funds (shortly referred as 'Mutual Funds) with ARN No. 90319
BFL does NOT:
(i) provide investment advisory services in any manner or form.
(ii) carry customized/personalized suitability assessment.
(iii) carry independent research or analysis, including on any Mutual Fund schemes or other investments; and provide any guarantee of return on investment.
In addition to displaying the Mutual fund products of Asset Management Companies, some general information is sourced from third parties, is also displayed on As-is basis, which should NOT be construed as any solicitation or attempt to effect transactions in securities or the rendering any investment advice. Mutual Funds are subject to market risks, including loss of principal amount and Investor should read all Scheme/Offer related documents carefully. The NAV of units issued under the Schemes of mutual funds can go up or down depending on the factors and forces affecting capital markets and may also be affected by changes in the general level of interest rates. The NAV of the units issued under the scheme may be affected, inter-alia by changes in the interest rates, trading volumes, settlement periods, transfer procedures and performance of individual securities forming part of the Mutual Fund. The NAV will inter-alia be exposed to Price/Interest Rate Risk and Credit Risk. Past performance of any scheme of the Mutual fund do not indicate the future performance of the Schemes of the Mutual Fund. BFL shall not be responsible or liable for any loss or shortfall incurred by the investors. There may be other/better alternatives to the investment avenues displayed by BFL. Hence, the final investment decision shall at all times exclusively remain with the investor alone and BFL shall not be liable or responsible for any consequences thereof.
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Disclaimer on Risk-O-Meter:
Investors are advised before investing to evaluate a scheme not only on the basis of the Product labeling (including the Riskometer) but also on other quantitative and qualitative factors such as performance, portfolio, fund managers, asset manager, etc, and shall also consult their Professional advisors, if they are unsure about the suitability of the scheme before investing.
Disclosure: Bajaj Finance Limited (BFL) is a distributor of Mutual Funds with ARN - 90319 and distributes mutual funds of Bajaj Finserv Asset Management Limited (BFSAMC). BFL receives commission towards distribution of mutual fund products. BFSAMC is a group company of BFL, carrying business on arm’s length basis without any conflict of interest and in accordance with the prevailing law / regulation.
Disclaimer
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The information BFL contained in this article is for general informational purposes only and does not constitute any financial advice. The content herein has been prepared by BFL on the basis of publicly available information, internal sources and other third-party sources believed to be reliable. However, BFL cannot guarantee the accuracy of such information, assure its completeness, or warrant such information will not be changed.
This information should not be relied upon as the sole basis for any investment decisions. Hence, User is advised to independently exercise diligence by verifying complete information, including by consulting independent financial experts, if any, and the investor shall be the sole owner of the decision taken, if any, about suitability of the same.
Disclaimer
Mutual Fund SIP calculator may provide potential investors an approximate estimate on the maturity amount of the monthly SIP, purely based on mathematical calculation of the projected annual return rate selected by investor. However, such calculation does not factor the actual performance by the Asset Management Company (AMC) and should not be treated as any advice or assurance about the actual return of investment. Mutual Funds do not have a fixed rate of return and it is not possible to predict the rate of return. Please note that the SIP calculator are for illustrations only and do not represent actual returns which may vary depending on various factors including but not limited to actual performance, expense ratio, taxation, exit load (if any), etc.