Gold Investment in India – How to Invest, Options, Benefits

Updated on:  

08 min read

Gold is one of the most preferred investments in India. High liquidity and inflation-beating capacity are its strong selling points, not to mention charm, prestige, and so on. Gold prices shoot up when the markets face turbulence. Though there are phases when markets witness a fall in gold prices, it won’t last for long, and always makes a strong comeback. This article covers the following:

Why Should You Invest in Gold

Safety, liquidity, and returns are the three criteria most risk-averse investors look for before investing. While gold meets the first two criteria without any hiccups, it doesn’t perform poorly at the last one either. Here is why you should invest in gold:

a. Investing in gold is worthwhile because it is an inflation-beating investment. Over time, the return on gold investment has been in line with the rate of inflation.

b. Gold has an inverse relation with equity investments. For example, if the equity markets start going down, gold would perform well. Considering gold as an investment option in your investment portfolio will be a buffer to the overall volatility of your portfolio.

How to Invest in Gold

The ‘golden question’ here is – how does one invest in gold? Traditionally, it was by buying physical gold in the form of coins, bullions, artefacts, or jewellery. However, there are newer forms of gold investments nowadays, such as gold ETFs (exchange-traded funds) and gold mutual funds.

Gold ETFs are similar to buying an equivalent sum of physical gold but without the hassles of having to store the physical gold. Hence, there is no risk of theft/burglary as the gold is stored in Demat (paper) form. Gold funds involve investing in gold mining companies.

Let’s understand different ways of investing in gold from the following table:

GoldGold ETFs (Exchange Traded Funds)Gold Funds
Investment in physical goldThe investor buys a proportionate value of gold but not in the physical formThe investment is made in bullion and companies involved in mining gold
No need for Demat accountThe investor needs a Demat accountNo need for a Demat account to invest
Market fluctuations directly affect the prices of goldChanges in the gold prices affect that of gold ETFsChanges in the gold prices don’t affect gold funds directly
No additional charges other than the physical gold itselfGold ETFs involve asset management and brokerage feesThere’s a minimum charge to manage the gold funds.
Risks of theft and burglary associated with storing physical goldGold ETFs remove the burden of trading gold in the physical formEliminates the risk of theft/burglary and buffers investments to changing market fluctuations
No paperwork required for investingPaperwork required for investing in gold ETFsPaperwork is required for investing in gold funds
Systematic Investment Plan (SIP) not availableNo SIP optionSIP available
Best suited for conventional investorsBest suited for investors who have the required time and skillset to tradeBest suited for investors who expect high returns by taking calculated risks

What are Gold Funds

By investing in gold funds, you invest in stocks of companies operating in gold and gold-related activities. Gold mutual funds include silver, platinum, and other metals in their investment basket. A mutual fund manager on behalf of an asset management company manages the gold fund, unlike gold ETFs. They make use of the fundamental trading analysis to buy and sell stocks to maximise returns for investors. Returns from gold funds depend on market conditions to an extent. Gold mutual funds eliminate the risk of returns considerably by distributing investments over a wide range of investment options. In other words, mutual funds work on the principle of diversifying, i.e. not putting all eggs in one basket. Investors need to weigh their risk appetite and goals before choosing such a mutual fund.

Gold Investment vs Mutual Funds

ParticularsGold InvestmentMutual Fund
DefinitionGold is a precious high-value metal that is liquid in naturePools investors’ money in equities, debts and other market instruments to multiply the money
ManagementInvestments are made and managed by the investorExperts manage the investment professionally to create wealth and reduce risks
Risk InvolvedPhysical carrying and storage of gold involves high risks of theft and burglaryInvestment in mutual funds can be made with safe and secure methods
ReturnsGold does not pay any dividendsMutual funds yield substantial returns to the investor
Investment CostTaking an average cost of Rs.31,000 per 10 grams, one needs to carefully think before making an initial investment in gold; considering the high price to begin investingMutual fund investment is affordable and flexible. One can start investments from Rs.1,000

All investments have their own set of pros and cons. Investing in physical gold needs safety and security to preserve the same from theft. Investing in gold comes with a bunch of disadvantages; the other viable investment option that one can consider is mutual funds. They are also more tax-efficient as compared to traditional investments, and have the potential to provide much higher returns when the markets are favourable.

Frequently Asked Questions

How to invest in mutual funds in India?

You can invest in mutual funds directly with the asset management company (AMC) through the direct plan. You must complete your KYC at a KRA (KYC Registration Agency) online by filling the KYC registration form and uploading the self-attested identity proof such as PAN Card and address proof such as Passport/Driving License/Voter ID and also a passport size photograph. You will also have to complete the IPV (In-Person Verification).

You may also invest in mutual funds through a mutual fund distributor by opting for a regular plan. The mutual fund house would pay a commission to the mutual fund distributor or the intermediary. You may invest in mutual funds offline by visiting the mutual fund house and filling up the application form and submitting documents for KYC compliance.

How to invest in mutual funds online in India?

You may invest directly with the mutual fund house through the direct plan. You just have to visit the website of the fund house and fill up your relevant details such as name, email id, mobile number and bank details.

You may complete the KYC online through eKYC where you enter the Aadhaar and PAN details. Your information would be verified at the backend and you may start investing in mutual funds after transferring money online from your bank account.

You may also invest through an online platform such as Cleartax Invest.

  • You must log on to cleartax invest
  • You then select the mutual fund house from the list of fund houses
  • Pick the mutual fund scheme based on your investment objectives and risk tolerance and click on Invest now
  • You must select the amount you plan to invest in the mutual fund scheme and the mode as either One Time or Monthly SIP
  • You must fill up the requisite details such as name, email ID, mobile number and complete the transaction
How to invest in mutual funds for beginners in India?

You must choose the appropriate mutual fund scheme based on investment objectives and risk tolerance, if you are a beginner in mutual funds. You may invest in mutual funds online or offline as per your convenience.

You may invest in mutual funds offline in a direct plan of a mutual fund scheme by visiting the branch of the fund house. You can invest in a regular plan through a mutual fund distributor.

You may invest in direct plans of mutual funds online by visiting the website of a fund house. You may complete your eKYC for KYC (Know Your Customer) compliance by submitting Aadhaar and PAN details and then invest in the scheme of your choice. You could complete your KYC at a KRA (KYC Registration Agency) before investing in mutual funds.

How to invest in mutual funds without a Demat account?

You may invest in mutual funds directly with the mutual fund house by visiting the branch of the AMC. You just have to fill up the application form and submit the self-attested identity and address proof for KYC compliance.

You may submit the cheque for the initial amount and you are allotted a PIN and folio number. You can also approach a mutual fund distributor and invest in the regular plan of the mutual fund.

You may invest in a direct plan of a mutual fund online through an AMC. You must fill up the registration form and complete your eKYC by submitting PAN and Aadhaar details. You may also invest in an online portal such as Cleartax Invest.

How to invest in mutual funds directly?

You may invest in mutual funds directly by visiting the office of the mutual fund house. You must submit your self-attested identity and address proof along with the filled application form and passport size photographs for KYC-compliance. Make a cheque for the first investment and invest in the mutual fund scheme of your choice.

How to invest in direct mutual funds online in India?

You may invest in direct mutual funds online by visiting the website of the mutual fund house. You may fill in the application form and complete your eKYC by submitting your PAN and Aadhaar details.

The AMC would verify your details and you may invest through your online bank account. You may invest in direct mutual funds online in India through the online portals such as Cleartax Invest.

How much to invest in mutual funds per month?

You may invest in a mutual fund scheme through a systematic investment plan or SIP. It is a method of investing in a mutual fund where you invest a fixed amount regularly in a mutual fund scheme of your choice. You may invest as low as Rs 500 per month through the SIP in the mutual fund scheme of your choice.

How to invest in mutual funds without a broker?

You may invest in a direct plan of a mutual fund either offline or online directly through the asset management company or AMC. You may visit the branch of the fund house and fill up the mutual fund application form and submit the self-attested identity and address proof along with a passport size photograph to complete your KYC.

You may invest in a direct plan of a mutual fund online by visiting the website of the AMC. You may fill the mutual fund application form with required details such as name, bank details and complete your eKYC by submitting your PAN and Aadhaar details. You may invest in mutual funds through your online bank account.

You may invest in mutual funds through an online portal such as ClearTax Invest.

  • Log on to cleartax invest
  • Select the mutual fund house from the list of fund houses
  • Pick the mutual fund scheme based on your investment objectives and risk tolerance and click on Invest now
  • Select the amount you plan to invest in the mutual fund scheme and the mode as either One Time or Monthly SIP.
How to invest in equity mutual funds?

You may invest in a direct plan of an equity fund directly through the asset management company (AMC). You may visit the branch of the fund house and fill up the mutual fund application with required details such as name, mobile number and bank details.

Complete your KYC by submitting the self-attested identity and address proof and submit passport size photographs. You may submit the cheque for the initial amount and you are allotted a PIN and folio number. You can also approach a mutual fund distributor and invest in the regular plan of the mutual fund.

You may invest in equity funds online by visiting the website of the mutual fund house. You may fill in the application form online and complete eKYC with PAN and Aadhaar details. Start investing in the mutual fund scheme with your online bank account.

How to invest in mutual funds through SIP online?
  • You must first complete your KYC before investing in a mutual fund. You may do so at a KRA (KYC Registration Agency) online by filling the KYC registration form and submitting the self-attested identity and address proof.
  • You then visit the website of the fund house and choose the mutual fund scheme of your choice.
  • You may fill an application form with required details such as name, mobile number, PAN and create a username and password.
  • You then enter your bank account details and set up the SIP auto-debit amount.
  • You may log on to your account created at the fund house and choose the mutual fund scheme.
  • You must make the first SIP instalment online and the next instalment after 30 days. (The AMC will intimate you on the requisite date).
  • You may continue the SIP till the end of the chosen tenure. (You may decide the tenure of the SIP).
What are mutual funds and how to invest in them?

Mutual funds are a professionally managed investment where the money is pooled by several investors and used to purchase securities. It may invest your money in equity, debt or a mix of both equity and fixed income depending on the type of mutual fund.

You may invest in the direct plan of mutual funds directly through the AMC both offline and online. You may also invest in mutual funds through a mutual fund distributor.

How to invest in US mutual funds in India?

You may invest in US mutual funds through fund of funds (FoFs) schemes with a mutual fund house in India. It is an indian mutual fund scheme that invests in US- based active equity mutual funds. However, they have a higher expense ratio as compared to most equity schemes. You may also invest in indian equity schemes whose portfolio mimics a US stock market index such as S&P 500 or the Nasdaq 100.

You may invest in these fund of funds schemes through an asset management company in India. You could consider completing your KYC before investing in US mutual funds from India.

How to invest a lump sum in mutual funds?

You may invest a lump sum amount in a mutual fund through a direct plan with the asset management company. You could opt for the offline or online mode of investment. You must complete your KYC by submitting a self-attested identity and address proof along with passport size photographs at the branch of the mutual fund house.

You could invest a lump sum amount in mutual funds through an online platform such as cleartax invest. You just have to log on to cleartax invest and select the mutual fund house and the scheme. You then select the amount and the mode of investment as One Time if you want to put a lump sum amount in a mutual fund.

How to invest in mutual funds through demat account?

You may invest in mutual funds through a demat account with your stock broker or through any depository participant. The mutual fund units would be held in the dematerialised form. You can buy and sell mutual fund schemes through your demat account just like shares. It is a dematerialized account which can hold stocks, mutual funds and other securities.

  • Open a demat and trading account with a stock broker
  • You can buy and sell units of mutual fund schemes
  • However, charges are higher as compared to other modes of investing in mutual funds
How to invest in debt mutual funds?

You may invest in direct plans of debt funds directly with an AMC. You could visit their branch office and fill the application form. You then complete the KYC by submitting the self-attested identity and address proof and passport size photographs.

You may invest in direct plans of debt mutual funds online by visiting the website of the AMC.

  • Create an account with the AMC
  • Complete your eKYC by submitting PAN and Aadhaar details
  • Specify the amount you want to invest and the frequency of your investment
  • You may give online instructions to your bank to transfer the requisite amount to the fund house on a specified date.

You may invest in debt funds through an online platform such as Cleartax Invest. You have to log on to cleartax invest and pick the mutual fund house and the debt scheme. You then select the amount and the mode of investment as One Time or SIP to commence investing in the debt fund.

How to invest in elss mutual funds online?

You may invest in regular plans of ELSS through a mutual fund distributor. You can invest in the direct plan of the ELSS mutual fund online directly with an AMC. You must create an account with the AMC. Fill up the application form with personal details such as name, mobile name and so on.

You may complete your eKYC by submitting your PAN and Aadhaar details. You may give online instructions to your bank to transfer the requisite amount to the fund house on a specified date and start investing in the ELSS mutual fund.

You may invest in ELSS mutual funds online through online platforms such as Cleartax Invest.

  • Log on to cleartax invest.
  • You must pick the mutual fund house from the list of fund houses
  • Select the ELSS mutual fund scheme based on your investment objectives and risk tolerance and click on Invest now
  • Select the amount you plan to invest in the ELSS mutual fund scheme and the mode as either One Time or Monthly SIP
How to invest Rs 500 in mutual funds?

You may invest in direct plans of mutual funds either online or offline. You must complete your KYC before investing in mutual funds. However, you may invest in regular plans of mutual funds through a mutual fund distributor.

You may consider investing just Rs 500 per instalment in an SIP of a mutual fund. It is a method of investing regularly in a mutual fund scheme of your choice.

How to invest in large cap mutual funds?

You may invest in direct plans of large cap mutual funds either offline or online by investing directly with the AMC. Complete your KYC by submitting self-attested identity and address proofs or eKYC for online mode. You could invest in regular plans of large cap mutual funds through a mutual fund distributor.

You may invest in large cap funds through online platforms such as Cleartax Invest.

  • Log on to cleartax invest.
  • You must opt for the mutual fund house from the list of fund houses
  • Select the large cap mutual fund based on your investment objectives and risk tolerance and click on Invest now
  • Select the amount you plan to invest in the large cap fund and the mode as either One Time or Monthly SIP
How to invest 1 crore in mutual funds?

You may invest Rs 1 crore in a direct plan of a mutual fund. You may invest online or offline directly with the AMC. However, you must complete your KYC before investing Rs 1 crore in the mutual fund.

You may invest Rs 1 crore in mutual funds through an online platform such as cleartax invest. You just have to log on to cleartax invest and select the mutual fund house and the scheme. You then select the amount and the mode of investment as One Time if you want to put a lump sum amount in a mutual fund.

However, it would be prudent to invest in mutual funds through SIP instead of putting Rs 1 crore through a one time investment. It is a method of investing small amounts regularly in a mutual fund scheme of your choice.

How to invest in money market mutual funds in India?

You may invest in direct plans of money market mutual funds either offline or online by investing directly with the AMC. You must complete your KYC by submitting self-attested identity and address proofs. You must complete eKYC for the online mode of investing in money market mutual funds by submitting PAN and Aadhaar details. You could invest in regular plans of money market funds through a mutual fund distributor.

You may invest in money market mutual funds through online platforms such as Cleartax Invest.

  • Log on to cleartax invest.
  • You must opt for the mutual fund house from the list of fund houses
  • Select the money market mutual fund from the category of debt funds based on your investment objectives and risk tolerance and click on Invest now
  • Select the amount you plan to invest in the money market mutual fund and the mode as either One Time or Monthly SIP.
How to invest in STP mutual funds?

A systematic transfer plan or STP allows you to periodically transfer (switch) a certain amount of units from one mutual fund scheme to another mutual fund scheme of the same mutual fund house. You may consider an STP from an equity scheme to a debt scheme or vice versa depending on the market conditions.

You may invest in STP in mutual funds through the following steps:

  • You may fill up your STP form and submit it at the office of the AMC. You could fill this form online at the website of the mutual fund house.
  • Select the mutual fund scheme (destination fund) where you intend to invest for the long-term.
  • You may then select the mutual fund scheme (source fund) where you want to invest the lump sum amount.
  • You may choose the time-frame from where the lump sum amount invested may be moved to the destination fund. You can choose daily, weekly or monthly STPs according to your convenience.
How much money do you need to invest in mutual funds?

Systematic Investment Plan or SIP is a method of investing in mutual funds. You may invest a fixed amount regularly in a mutual fund scheme of your choice. You can invest just Rs 500 per instalment in a mutual fund through the SIP.

How to invest in mutual funds in the name of minors?

You can invest in mutual funds in the name of a minor child. The minor child is the sole holder in the mutual fund folio. The guardian for the mutual fund folio must be a parent or a court-appointed guardian.

  • You may approach the branch of an AMC.
  • Submit documents showing the child’s date of birth such as passport or birth certificate while opening a mutual fund folio. You also need documents to establish the relationship between the minor child and the parent/guardian. (For parent it could be the passport and for the guardian it is the copy of the court order)
  • The parent/guardian must be KYC-compliant to invest in mutual funds in the name of minor child
  • You can even register an SIP or STP instruction in the mutual fund folio of a minor child. However, it would cease once the minor child turns 18 years of age.
How to invest in mutual funds for the short term?

You may consider investing in mutual funds depending on investment objectives and risk tolerance. Invest in debt funds to meet your short-term financial goals. You can invest offline or online in direct plans of debt mutual funds with the mutual fund house.

However, you may invest in regular plans of debt funds through a mutual fund distributor. You can invest in debt funds through an online platform such as cleartax invest.

How to invest Rs 10,000 in mutual funds?

You can invest in mutual funds offline or online through a mutual fund house or an intermediary (broker). You may also invest in mutual funds through an online platform such as Cleartax Invest.

  • Log on to cleartax invest to put Rs 10,000 in mutual funds
  • You must opt for the mutual fund house from the list of fund houses
  • Select the mutual fund scheme based on your investment objectives and risk tolerance and click on Invest now
  • Select the amount you plan to invest in the mutual fund and the mode as One Time to invest Rs 10,000 in mutual funds.
How to invest in gold through mutual funds?

You may invest in Gold ETFs or gold funds either online or offline directly with a mutual fund distributor. You can also invest in these funds with the help of a mutual fund distributor.

However, you may consider investing in gold funds or Gold ETFs through the SIP route. You may invest just Rs 500 per instalment. You can invest in Gold ETFs and gold funds through online platforms such as cleartax invest.

How to invest in mutual funds for retirement?

You may invest in equity funds or ELSS mutual funds for retirement. You must invest in equity funds for the long-term to achieve long-term financial goals such as retirement planning.

You may invest in direct plans of equity funds and ELSS through an asset management company. However, you could consider investing through a broker for regular plans of these mutual funds.You could invest in equity funds and ELSS through online platforms such as cleartax invest.

How much to invest to get 3,00,000 in 3 years in mutual funds?

You may invest a lump sum amount in mutual funds or even through the SIP route. You can invest just Rs 500 per instalment in the mutual fund scheme of your choice through the SIP. Consider using ClearTax Mutual Fund Returns Calculator to determine how much to invest to get Rs 3,00,000 in 3 years.

How to invest in mutual funds in Canada?

You may consider investing in a fund of funds that puts money in Canadian mutual funds. You may approach a mutual fund house which offers the requisite facility.

How to invest in International Mutual Funds?

You may invest in International Mutual Funds directly through an AMC in India. It is an Indian mutual fund scheme which invests in stocks of foreign companies. However, you may consider the fund of funds schemes which invest in foreign mutual funds or whose portfolio mimics a stock market index such as the Nasdaq 100 or S&P 500.

You can invest in International Mutual Funds through an online platform such as Cleartax Invest.

  • Log on to cleartax invest
  • You must opt for the mutual fund house from the list of fund houses
  • Select the International Mutual Fund under the category ‘Equity’ based on your investment objectives and risk tolerance and click on Invest now
  • Select the amount you plan to invest in the mutual fund and the mode as One Time or SIP.
How to invest in mutual funds as a student?

You can easily invest in mutual funds if you are a student above 18 years of age. You may invest in direct plans of mutual funds through the AMC. You can also invest in regular plans of mutual funds through a broker.

However, you must complete your KYC by submitting a self-attested identity and address proof and passport size photographs at the branch of the mutual fund house. You may complete eKYC online by submitting your PAN and Aadhaar details before investing in mutual funds.

Related Articles

Gold ETFs

Gold Mutual Funds

Sovereign Gold Bonds

inline CTA
Invest in Direct Mutual Funds
Save taxes upto Rs 46,800, 0% commission