Gold Mutual Fund Compare

Additional Useful Information

• An investor can buy “Units” of these mutual funds. These units can be purchased at a price which is called the “Net Asset Value or NAV”. The NAV of these funds keeps changing daily depending upon the changes in the stock prices of the companies that are held by them.

• The investor can sell these units anytime at the NAV price prevailing on the day of the sale.

• Total Purchase Amount	=	Number of Units X NAV as on the day of purchase
  Total Sale Amount	=	Number of Units X NAV as on the day of sale
  Total Gain	=	Total Sale Amount – Total Purchase Amount

• The fund house which issues a gold Mutual Fund may offer two options to select from –
• IDCW Option – In this option, growth in the mutual fund value is distributed back to the investor’s bank account in the form of periodic payouts called “Dividends”. This payout could be monthly or quarterly.
• Growth Option – In this option, growth in the mutual fund value is invested back in the fund for further growth. The investor’s gains are in the form of higher NAV price of the units of the fund.

• If an investor buys units in a gold Mutual Fund and sells them within a certain short period of time, then the fund house may charge the investor certain nominal fees, at the time of the sale. These charges are the “Exit Load”. This period of time is typically less than 1 year but varies from fund to fund. Typical exit loads can vary from 0 to 1% of the sale amount.

• Gold Mutual Funds are considered a good investment option over the long term (more than 5 years).

Returns *

• Gold Mutual Funds do not guarantee returns. However they are subject to domestic prices of gold.

• Gold Mutual Funds would deliver returns in line with gold returns. Gold, in the past 10 years has given an average return of about 7.5% to 10%

Risk Level

• Gold mutual funds are low risk investments.

• Gold prices are heavily dependent on the state of the economy. In an inflationary environment, gold prices rise. It is important to analyze the state of the economy before deciding on purchasing gold mutual funds.

Liquidity

• Gold mutual funds are typically liquid.

• When an investor sells (or redeems) units of these funds, the fund house will pay the sale amount to the investor in 2 working days.

Interesting Facts

• Gold mutual funds are passive investments. They do not try to outperform market returns. They simply track the domestic price of gold.

• Gold mutual funds are not subject to the risk of theft since they are stored in digital form.

• Holding physical gold may involve storage costs (such as purchasing a safe). However, all these storage costs are eliminated by purchasing gold mutual funds.

• Investors may notice that mutual fund returns may not be exactly in line with gold benchmark returns. This is called ‘Tracking Error’. This is caused by the costs a mutual fund takes to run its day to day operations such as administration costs, brokerage costs, etc.

Tax Implications

• Earnings received from Gold Mutual Funds are taxable.

• When investors sell their Gold Mutual Fund units, the difference between the Sale Amount and Purchase Amount is typically called “Capital Gain” or “Capital Loss” (if sale amount is lesser than the purchase amount).

• The tax that the investor must pay on Capital Gain is –
• Situation 1 – If the Gold Mutual Funds are sold within a period of 2 years from investment, the Capital Gains earned (called Short Term Capital Gains) are added to the taxable income of the investor and taxes are required to be paid based on the applicable tax slab.
• Situation 2 - If the Gold Mutual Funds are sold after a period of 2 years from investment, the Capital Gains earned (called Long Term Capital Gains) are taxed at 12.5% on the gains.

• In case of Capital Gain, this amount is to be added to the taxable income of the investor and taxes are required to be paid based on the applicable tax slab.

• There is no tax in case of “Capital Loss”.

• Any dividends/payouts received by investors from Gold Mutual Funds are also to be added to their total taxable income and taxes are required to be paid as per the tax slab.

Where To Invest

• https://www.etmoney.com/mutual-funds/featured/best-gold-mutual-funds/25

• https://www.indmoney.com/mutual-funds/collection/precious-metals-funds