Returns from investment in gold outperformed Nifty 50 returns in the past three years. Positioned as the perfect hedge against inflation, more people are now queuing up to invest in gold. Buying and storing physical gold is now passé; the focus is now on investing in digital gold. The most popular way of investing in gold is through gold mutual funds followed by other investment options like parking money in sovereign gold bonds (SGBs) and gold exchange-traded funds (ETFs).
We invest to earn returns. So, it makes sense to compare the returns of mutual funds before we invest in them. A comparative analysis of five years’ returns and the consistency at which the fund house has performed is a must before deciding which fund to put your money in. Take, for example, the Kotak Gold Fund which has outperformed its peers numerous times even with a humble corpus of Rs1299.27 crores under its management.
The Kotak Gold Fund has earned roughly 14.97 per cent and 11.60 per cent returns over three and five years, respectively. With the inflation rate going up and above 7.1 per cent in due course of time, staying invested in gold can help earn returns that exceed the current inflation. If you are looking at total returns over the past five years, then this fund has delivered impressive returns of 73.13 per cent on an absolute basis. Since its inception, investors in this fund have earned over 50 per cent, thus, lending them enough reason to stay invested in it.
Fund performance
Many investors inquire why they must invest in this fund more than any other. A comparative analysis of most gold mutual funds in this category underscores the exceptionally high-quality performance that investors swear by.
Staying invested for a prolonged period yields returns exceeding most other kinds of mutual funds, especially, the debt and liquid funds that are less risky but yield much lower when compared. This you can achieve by investing in this fund through systematic investment plans over a period ranging from 10 to 15 years.
| Name of the fund | Three-year returns | Five-year returns |
| Invesco India Gold Fund | 14.49% | 11.19% |
| Aditya Birla Sun Life Gold Fund | 14.70% | 10.67% |
| SBI Gold Fund | 14.59% | 11.07% |
Kotak Gold Fund
Launched on January 02, 2013, this fund has grown considerably both in size and returns. The risk factor is high though the risk-reward ratio makes taking this risk worthwhile. This medium-sized debt fund charges a 0.18 per cent expense ratio.
The fund is benchmarked against the Crisil 10 Yr Gilt Index as the primary index and Gold-India as the secondary index and can be bought to earn long-term returns. Considering the low expense ratio charged by this fund, the returns from this long-duration fund are quite high compared to most other funds in this category.
The minimum amount you can invest in this fund is ₹5000 in a lump sum while you can make an added minimum investment of ₹1000 in a lump sum in this fund. The minimum investment you can make through SIPs is ₹1000.
This fund attracts an exit load of one per cent for exits exceeding six per cent within 365 days from the date of allotment of units.
As per the guidelines stipulated by the Securities and Exchange Board of India (SEBI), investments in this fund come under the “High Risk” category.
Tax treatment
If the fund’s units are redeemed within three years of investment, the profits will be added to the investor’s income, which will be then taxed as per the rates mentioned in the Income Tax slab.
For investors who redeem the fund units after three years of staying invested, gains will be taxed at 20 per cent post indexation benefits.
Investors also earn dividends regularly from this fund. The dividend income from this fund will be added to the income of the investor who would then be taxed as per the respective tax slabs.
The fund house will deduct a TDS of 10 per cent on dividend income exceeding ₹5000 in any financial year.
Disclaimer: Mutual funds are subject to market risks. Please read the offer document carefully before investing. Also, the Securities and Exchange Board of India has stipulated the latest guidelines categorising this fund under the “High Risk” category.
