Gold mutual funds invest in gold ETFs while gold ETFs invest in gold with a purity of 99% Gold ETFs have no outflow charges, while gold mutual funds charge an exit charge when their shares are redeemed before one year. Gold mutual funds allow SIP investments, while the same is quite cumbersome in gold ETFs. Gold ETFs have lower management fees than gold mutual funds. Since gold MFs invest in gold ETFs, their expenses also include gold ETF expenses.
Key costs of gold ETFs include Demat charges, expense ratio, and brokerage charges, bringing the annual cost to approximately 0.5-1%. Gold mutual funds are close to 0.6-1.2% per annum, which includes the aforementioned gold ETF charges and 0.1-0.2% gold management charges. There are no exit charges applicable to gold ETFs, whereas, for gold funds, you may have to pay an exit charge of 1 to 2% on the redemption within a year. The difference in the costs involved for both of them is not very high, therefore, it is reduced to the investment method that is most convenient for you.
GraniteShares Gold Trust (BAR). ETF Database. abrdn Physical Gold Shares ETF (SGOL). Abren.
Chintan Haria, Product Development Manager %26 Strategy, ICICI Prudential Mutual Funds, talks about how gold ETFs vary from gold investment funds. Now, when the biggest difference between gold mutual funds and gold ETFs invest in the path that best suits your needs. Therefore, investors who wish to invest in gold for a return or convert it to physical gold in the future may consider investing in gold ETFs. Since gold ETFs invest in physical gold, the returns they offer are almost similar to those offered by physical gold.
It helps with asset diversification and ensures that your portfolio is well-balanced; as gold prices fall or rise, you can adjust your asset allocation plan to ensure that risk is minimized and profits are maintained. In addition, if you are looking to diversify your investment portfolio, gold ETFs may be appropriate investments. The other side of convenience is the outbound charge to be paid, which is slightly higher than that of gold ETFs. Both gold ETFs and gold funds have the net asset value (NAV) calculated at the end of any business day.
While the performance of the gold mutual fund will depend on fluctuations in the physical price of gold, the performance of a thematic gold fund will depend on the companies and the subjects in which it is invested. You can invest in gold or another precious metal as an asset, either by buying physical gold or investing in it electronically (for example, gold mutual funds, like any other mutual investment fund, earn returns based on the return on their underlying investment). Therefore, for this convenience, the fund charges a slightly higher commission to investors, which is around 1.5% of the fund's AUM (assets under management), while gold ETFs only charge about 1%. Investments are made electronically, which means that you can invest in gold without actually having it in physical form.
Investing in gold funds is beneficial during uncertainty in the stock markets because it acts as a hedge for the investment portfolio.