Reasons to Invest in the Best Gold Mutual Funds

Reasons to Invest in the Best Gold Mutual Funds

Investing in commodities like gold and other precious metals is an effective way to diversify one’s portfolio. This also helps to provide a hedge against inflation. You can invest in it in several ways. These include buying the physical product, through exchange-traded funds, stocks of gold companies, futures, options and mutual funds.

Each of these forms of investments has its risk profile and they are more suitable to one investor and another. The type of investment you choose will depend on various factors such as your investment goals and your risk averseness. You can see more of this here.

As an investor, you should not restrict yourself to only buying the physical commodity in form of bullion and coins. You can use one of the alternative investment methods. For example, exchange-traded funds (ETFs), as well as mutual funds, can offer you exposure to gold’s stability. At the same time, they provide you with liquidity that the physical commodity will not.

What Are Mutual Funds?

Gold mutual funds are popular ways of investing in the commodity. A typical fund invests in gold reserves. They can be bought from a number of ETFs or investment companies such as those involved in producing and distributing the commodity. This can be the physical version or as in stocks or shares of these organizations.

Funds of this kind provide a superb way of diversifying investments without actual ownership. Unlike other kinds of investments, they offer you as many units of the asset as there is demand for in the market. They can as well be traded just like bonds and stocks which is what makes them more liquid. They are safer than owning the physical commodity. Investors do not have to worry about storage cost and security issues.

A lot of investors use the funds to protect themselves from political and economic upheavals. Advisedly, they can be around 10 -12% of an investor’s portfolio. This ensures that their investment is secured no matter the happenings in the market.

Bear in mind that mutual funds are different from ETFs. While the former is held through a fund that invests in an exchange-traded fund, the other is on the stock exchange directly. It is also easier to get money from mutual funds. You simply put in your request and the money will be sent to you.

Mutual funds may be actively or passively managed. Passively managed ones track the underlying stocks of gold mining and refining companies. Actively managed ones hope to exceed the returns from passively managed ones and in essence, they charge higher expense ratios.

You should note that just like stocks, you are buying paper that is backed by the debt or equity of a mining company. It can also be a future or options contract for physical gold.

This means that the value of the mutual fund may not exactly match up with that of the commodity’s market price. It also means that the performance of the investment may not be the same as that of physical gold. You can check out this link to learn more.

Benefits of Investing In Gold Mutual Funds

Gold has been around for ages and still, it remains one of the most desirable forms of investments and currency exchange. It offers some special advantages and some of these are:

Hedging Against Inflation

It is not uncommon for investments to lose value due to inflation. Commodities like gold are one of the few assets you can invest in and you can be sure not to lose value; at least to a large extent. This makes it a good way to protect your investment.


Investing in a gold mutual fund can help to offer diversification for your investments. This helps to reduce the risk that comes from market forces. Its prices are not connected to the stocks of companies. It is therefore an asset that is useful when others seem not to be performing well.


Gold mutual funds are different from other kinds of funds. They can be sold easily, quickly and without stress making them excellent financial buffers in times of financial strain. The amount you can get is not limited and you can save as much as you want.

More Reasons To Invest in A Gold Mutual Fund

For investors in a mutual fund, this type of fund is typically picked over buying the physical commodity for two reasons. It is much easier to invest in them than to hold the physical commodity. You can buy them and keep them digitally and no need for physical storage.

This means you do not have to worry about the logistics of moving them. It also decreases risks associated with loss and theft.

Secondly, by investing in them, you get the added benefit of your investment being managed professionally. These professionals are adept at handling all aspects of your investment and you can benefit from their experience. Those who invest in physical gold do not enjoy this as they have to do their research and transact by themselves.

So, if you are looking to diversify your investment portfolio and mitigate risks, you should look to invest in gold mutual funds. They may also provide an option for getting tax benefits as taxes are not deducted at source.


Gold mutual funds remain one of the best ways to invest in the commodity. This is especially true for investors who do not want to be bothered about the intricacies of buying the physical commodity. They come with low risks and are also easy to buy and liquidate.