Investing in gold is less risky and its value increases over time. However, there are no interest or dividends, so investors don't have the option to reinvest, which limits the returns on their investment in gold. On the other hand, equity funds earn higher returns compared to gold, which you can reinvest to maximize your profits. The purpose of gold mutual funds is to make profits over time by appreciating the investment.
Gold mutual funds can move in the same direction as the spot price of gold because investments are correlated. Unlike gold ETFs, gold mutual funds are not traded during the day. Rather, they are traded according to their net asset value at the end of the day. Since gold ETF units are traded on stock exchanges, they can be bought or sold at any time of the day during trading hours.
If this doesn't work for you, a gold ETF may be a better option because they don't usually require a minimum investment amount. For example, if the overall market is down, the mutual fund may perform better than the market in general because one investment may perform better than another investment in the fund. Although gold funds are more liquid than physical gold, they cannot be traded during the day (market hours in the stock markets). Gold funds are ideal for a passive investor who may not want to keep up with market fluctuations and manage an investment portfolio.
Gold funds are popular with investors because they offer an affordable way to invest in the precious metal without having to manage a physical investment in gold. Gold mutual funds are managed by professional asset managers or asset management companies that carefully select investments that are trying to outperform the market. Some people may prefer to buy digital gold or gold ETFs instead of buying physical gold bars. Instead of buying gold bars and coins, you can buy shares in a gold mutual fund or a gold exchange-traded fund.
However, in the case of gold ETFs, the minimum investment amount would be equivalent to the current price of 1 gram of gold. Despite the fact that gold is a conventional investment source, it can still surpass modern instruments because of its value. So what should you buy this time? Physical gold, sovereign gold bonds (SGB), gold ETFs (gold exchange-traded funds), digital gold or gold mutual funds? Like gold mutual funds, investing in gold through a gold ETF can be a convenient and accessible way to expose yourself to the safe haven asset. A gold mutual fund is an investment fund that invests in gold indirectly by investing in gold ETFs as an underlying asset.
Compared to gold ETFs, gold mutual funds offer slightly more exposure to risk because they invest in gold stocks, which tend to be price sensitive. Unlike gold mutual funds, the underlying asset of gold ETFs are the shares of gold mining companies or physical gold itself.