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Time of India
11 hours ago
- Business
- Time of India
Up 29% in 5 months! Should you invest or avoid gold mutual funds?
Gold based funds and ETFs together have offered an average return of 29.11% in the current calendar year so far. There were around 32 funds including both gold funds and gold ETFs in the said time period. LIC MF Gold ETF FoF offered the highest return of around 30.14% in the current calendar year so far, followed by UTI Gold ETF which gave 29.75% return in the same Gold ETF gave 29.37% return in the same period. Zerodha Gold ETF delivered a return of 29.28% in the said time period. Play Video Pause Skip Backward Skip Forward Unmute Current Time 0:00 / Duration 0:00 Loaded : 0% 0:00 Stream Type LIVE Seek to live, currently behind live LIVE Remaining Time - 0:00 1x Playback Rate Chapters Chapters Descriptions descriptions off , selected Captions captions settings , opens captions settings dialog captions off , selected Audio Track default , selected Picture-in-Picture Fullscreen This is a modal window. Beginning of dialog window. Escape will cancel and close the window. 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View Details » by Taboola by Taboola Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like Most Cat Parents Miss This About Their Aging Cats Dr. Marty Click Here Undo Also Read | ITC and Cochin Shipyard among stocks that Quant Mid Cap Fund bought and sold in May Invesco India Gold ETF FoF and Groww Gold ETF FOF gave 28.34% and 28.14% returns respectively in the current calendar year so far. Experts attribute this surge to a combination of global economic and geopolitical factors such as geopolitical uncertainty and central bank buying. Live Events 'Gold prices have rallied in recent times due to a combination of global economic and geopolitical factors such as rising tensions globally, such as conflicts in the Middle East, and Trump tariffs, have increased demand for gold as a safe-haven asset and several countries, including China and India, have been aggressively adding gold to their reserves to diversify away from the US dollar and enhance financial security,' Shweta Rajani, Head - Mutual Funds , Anand Rathi Wealth Limited shared with ETMutualFunds. The expert further shared country wise gold purchases over the years and mentioned that with India seeing a huge jump to 72.6 tonnes of gold in 2024, the highest annual purchase in this three-year period and a 347% increase from 2023 and this sharp rise indicates a strategic focus on gold as a reserve asset, aligning with global trends of de-dollarization and building resilience due to the geopolitical and economic uncertainties. Echoing a similar opinion, another expert mentions that fresh investments should be made cautiously. 'Gold has rallied due to rising global geopolitical tensions and increased central bank buying early in the year. While it has given strong YTD returns, fresh investments should be made cautiously, as much of the rally may already be priced in,' Shruti Jain, Chief Strategy Officer, Arihant Capital Markets told ETMutuaFunds. Quant Mutual Fund, in a recent note, highlighted that gold may be due for a short-term correction of 12-15% in dollar terms over the next two months. The fund house cautioned investors that the metal may have "peaked out" in the short term, noting that while gold prices have surged recently, the momentum could slow down, and a retracement in prices could be on the horizon. While commenting on whether one should increase their gold investment or wait for further correction, Jain advises that after this steep run-up, it's better to wait for a dip before adding more and gold should ideally make up 3–5% of the total portfolio as a diversification and risk-hedging tool. On the other hand, Shweta Rajani suggests investors to maintain a balanced portfolio, with an asset allocation of 80:20 in equity to debt but if one wants exposure to gold, it should not exceed 5-10% of their portfolio. Also Read | Eternal and Vedanta among stocks which Edelweiss Mutual Fund bought and sold in May 'Gold should be treated as a defence asset, with maximum exposure at 20%. Combined allocation to gold and debt should not exceed 20% of the overall portfolio to maintain growth potential,' she added. Amid safe-haven buying triggered by Israel-Iran tensions and weakness in the dollar index, gold August futures contracts on the MCX opened sharply higher by Rs 2,011 or 2.04%, crossing the Rs 1 lakh mark to trade at Rs 1,00,403 per 10 grams on last Friday, according to a report by ETMarkets By attributing the recent gold rally to mainly driven by demand and supply, not underlying fundamental metrics, the expert from Anand Rathi Wealth mentions that investing in Gold through SIP is not the best option for investors. They would generate a better return investing in equity mutual funds. She further shared that if an investor does an SIP in Gold ETFs and another investor does an SIP in 5 diversified equity mutual funds, the XIRR return for gold is 12.53%, whereas for an equity mutual fund portfolio, it is almost 15%. Sharing a different opinion, Jain mentions that the rally is largely driven by geopolitical tensions and global factors, including safe-haven demand and foreign central bank purchases and having gold in your portfolio is always a good idea because it adds diversification and additionally it's also a good idea to invest via SIP to spread out your entry and manage risk. In the last one year, gold based funds have offered up to 38.16% returns with an average return of around 37.16%. Tata Gold ETF offered the highest return of around 38.16% in the last one year, followed by UTI Gold ETF which gave 38.09% return in the same period. Zerodha Gold ETF offered a 37.69% return in the last one year. Invesco India Gold ETF FoF gave the lowest return of around 35.61% in the last one year period. Post looking at the last one year performance and current rally, Jain shared that Gold may face some pressure if geopolitical tensions subside and also there is news on selling by China. 'Expect it to trade in a range, and avoid aggressive buying at current highs,' she adds. 'Gold ETF holdings have declined in May 2025 to 930 tonnes compared to April 2025. However, the expectation is that the investors will continue to invest in yellow metal for portfolio diversification,' according to commodity communique by Tata Mutual Fund. Also Read | Deepak Shenoy's Capitalmind Mutual Fund files its first draft document with Sebi for a flexi cap fund After analysing the different probabilities of CAGR of Nifty vs. Gold over different time frames, Shweta Rajani firmly says that Gold's ability to deliver high long-term returns significantly declines over time and the chance of earning over 12% CAGR from gold is just 0.58% over 10 years and drops to 0% over 15 years and despite similar volatility to equity, its long-term upside is limited, making it less rewarding on a risk-adjusted basis. 'When considering long-term wealth creation, Nifty maintains a much stronger probability of beating inflation and compounding wealth versus Gold, which have a higher standard deviation and lower risk adjusted return potential. As mentioned, gold is a defence asset like debt. Hence, the total allocation to gold and debt in your portfolio should not exceed 20%,' Shweta Rajani said. Gold is considered a hedge against inflation and with global economic conditions remaining uncertain, gold is expected to retain its appeal as a hedge against market instability. Gold ETFs are exchange-traded funds that track the price of physical gold. Each unit of a Gold ETF is backed by a specific quantity of gold, usually equivalent to one gram. They are listed on stock exchanges, and you need a demat and trading account to buy and sell them. ( Disclaimer : Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times) If you have any mutual fund queries, message on ET Mutual Funds on Facebook/Twitter. We will get it answered by our panel of experts. Do share your questions on ETMFqueries@ alongwith your age, risk profile, and Twitter handle.
Time of India
28-04-2025
- Business
- Time of India
19 gold ETFs, one glittering choice: Here's how to pick the best one
With around 19 gold ETFs available and to select the best one for investment, mutual fund experts list several factors that one should consider before choosing the correct gold ETF for investment. #Pahalgam Terrorist Attack India stares at a 'water bomb' threat as it freezes Indus Treaty India readies short, mid & long-term Indus River plans Shehbaz Sharif calls India's stand "worn-out narrative" 'One should look for instruments with a low expense ratio and a low tracking error before investing in the instrument. Often a lower tracking error comes with larger AUM as well,' Vishal Dhawan, CEO, Plan Ahead Wealth Advisors, a wealth management firm in Mumbai suggested. Also Read | Explained: Why one should read mutual fund factsheet before making an investment Best MF to invest Looking for the best mutual funds to invest? Here are our recommendations. View Details » by Taboola by Taboola Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like Free P2,000 GCash eGift UnionBank Credit Card Apply Now Apart from expense ratio, Siddharth Srivastava, Head - ETF Product and Fund Manager at Mirae Asset Investment Managers (India) shares two different factors that one need to check to choose a gold ETF Srivastava while mentioning the first critical factor as the total expense ratio (TER) adds that since all gold ETFs track gold of a standardised purity as mandated by regulation, the one with the lowest TER is generally preferable, as typically lower TER will result in higher returns. The other two factors he lists are liquidity and assets under management. Live Events 'The second critical factor is liquidity on the exchange. Investors should ensure that the gold ETF they choose has adequate trading volumes and a reasonable order book. Always buy ETFs using limit price. Lastly, while assets under management (AUM) can be considered as a supplementary factor, the primary focus should remain on TER and exchange liquidity,' said Srivastava. A deep dive into the expense ratio, tracking error, and assets under management of these 19 gold ETFs showed that Nippon India ETF Gold BeES, the largest fund has the highest expense ratio and even the tracking error is on the higher side whereas the funds with the low tracking error and expense ratio are the funds with small AUM. Zerodha Gold ETF which manages an asset base of Rs 232 crore has the lowest expense ratio of 0.32%. The tracking error stands on the higher side. Union Gold ETF which had an AUM of Rs 136 crore as on March 202 had the lowest tracking error of 2.61. After looking at the above data, Dhawan explains that based on AUM, if you look at tracking error in isolation, larger funds have a low tracking error compared to smaller AUM funds which reflects the efficiency that size brings in managing the fund and for expense ratio, funds with larger AUM often have a higher expense ratio. Commenting on the interpretation part, Dhawan adds that the fund size is helping AMCs with lowering tracking error, but it's often coming with a higher expense ratio. 'On a combined level (Expense and Tracking error), higher AUM is not resulting in a lower overall expense ratio (Expense and Tracking error). We recommend investors look at both the expense and tracking error before investing in the instrument,' he added. Also Read | Despite Friday's crash, Sensex is up over 5,000 points from April's low. Time to reconsider your SIP strategy? When the ETFs are traded on the exchange, an investor can check the last traded price, volume available for trade and the total value which indicates the liquidity of that ETF. With enough liquidity on the exchange and adequate trading volumes, the important thing to know is whether one should compromise on liquidity for a lower-cost ETF with less tracking error? Srivastava mentions that liquidity refers to the ease and surety with which an ETF or any other security can be bought or sold on exchange at fair price with low impact cost and this becomes especially important in case of large orders. 'So while low cost (TER) and low tracking error is important, poor liquidity can spoil the investment experience and realized returns,' he adds. While Dhawan sticks to how the instrument has performed over at least a year along with assessing the expense ratio and tracking error at the end of the year before investing. The prices of gold in India soared to record levels this week and breached the Rs 1 lakh mark and with now trading at nearly Rs 98,760, the Head - ETF Product and Fund Manager at Mirae Asset Investment Managers (India) mentions that there are several factors supporting gold prices like geopolitical issues, concerns due U.S. tariffs, increasing chances of a U.S. recession, higher inflation and weakness in the US Dollar and most importantly continued buying by global central banks. He adds that gold prices have already shown a strong one-way rally with one year return around 30% with several of the aforementioned factors being priced in. 'So while underlying supporting factors for gold continue, some correction may happen due to profit booking and investors may look to book some profit at these levels especially if they have over allocated.' Dhawan attributes the recent rally as the reason for gold to trade in an overvaluation zone and advice to stick to the asset allocation in any asset class. Also Read | Gold vs Nifty: Which investment gave higher SIP return in one year? An analysis by ETMutualFunds shows that Gold ETFs have significantly outperformed Nifty ETFs over the past year in terms of SIP returns. Out of SBI Mutual Fund's Gold ETF and Nifty 50 ETF, if an investor had made a monthly SIP of Rs 10,000 in the SBI Gold ETF, the XIRR over a one-year period would have been 54.35%. In contrast, the same investment in the SBI Nifty 50 ETF would have yielded an XIRR of just 2.93%. Further analysis reveals that, including the SBI Gold ETF, 16 gold-based ETFs have delivered XIRRs ranging between 48.32% and 54.85% over the past year. On the other hand, apart from the SBI Nifty 50 ETF, there are 15 ETFs benchmarked to the Nifty 50, which have offered XIRRs ranging between 2.87% and 3.03%. So, if you are planning to allocate to a gold ETF, Srivastava recommends an investor should invest from a long term point of view for asset allocation purposes and investing at dips in a staggered manner may be preferred. Experts generally recommend a small allocation in gold as a means of diversifying their portfolios and hedging against inflation. Advising on the allocation one should have in their respective portfolios, Dhawan said that one can look to an allocation of 5% to 10% in commodities, and if it is not there yet, additional exposure should only be taken through a SIP strategy. 'As an alternative, one can look at a combined instrument like Gold and Silver as well through a SIP,' he added. Gold ETFs are exchange-traded funds that track the price of physical gold. Each unit of a Gold ETF is backed by a specific quantity of gold, usually equivalent to one gram. They are listed on stock exchanges, and you need a demat and trading account to buy and sell them. ( Disclaimer : Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times) If you have any mutual fund queries, message on ET Mutual Funds on Facebook/Twitter. We will get it answered by our panel of experts. Do share your questions on ETMFqueries@ alongwith your age, risk profile, and Twitter handle.
