Just want to know, looking at the recent correction in the equity market, particularly after the outbreak of the Israel-Palestine war, I am inclined to invest in a gold mutual fund. Is it a good idea, if yes, please suggest some schemes and how I should go about it.
Shantibai
Reply by Rajiv Bajaj, Chairman & MD, BajajCapital Ltd
Certainly, investing in gold has long been regarded as a prudent strategy to hedge against inflation, constituting a fundamental principle in comprehensive financial planning. As part of our recommendations, we advocate allocating 10% of your total financial portfolio to physical gold and/or digital gold. Within the realm of digital gold options, viable choices include Sovereign Gold Bonds, gold mutual funds, or gold ETFs.
Given your specific inquiry about gold MFs, we propose considering this option, especially if you intend to invest a modest amount regularly through systematic investment plans (SIPs). For instance, if you plan to allocate Rs 5,000 or Rs 10,000 per month for 5, 7, 10, or even more years, opting for a gold MF through SIPs could be advantageous. In this context, we recommend the following schemes:
- HDFC GOLD FUND
- NIPPON INDIA GOLD SAVINGS FUND
The choice of a gold MF through SIPs offers distinct advantages. It allows you to navigate the inherent volatility in gold prices effectively. Additionally, the flexibility of making partial or full withdrawals of your investments at any time ensures high liquidity.
Initiating a monthly SIP in a Gold Mutual Fund is a straightforward process, and compliance with Know Your Customer (KYC) requirements is essential. It's worth noting that the investment in Gold Mutual Fund schemes does not necessitate the opening of a demat account, simplifying the overall investment process.
The mentioned Gold Mutual Fund schemes have been selected based on their historical performance, fund management expertise, and overall reputation in the market. However, it's crucial to conduct your due diligence and consult with a financial advisor to align your investment choices with your specific financial goals, risk tolerance, and investment horizon.
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Furthermore, understanding the significance of gold as a diversification tool within an investment portfolio is essential. Its unique properties often make it a counter-cyclical asset, providing stability and acting as a store of value, especially during economic uncertainties.
In conclusion, the recommendation to include gold in your investment portfolio, particularly through Gold Mutual Funds via SIPs, stems from a strategic approach to wealth accumulation. By adhering to a disciplined investment plan and leveraging the benefits of SIPs, you can navigate the dynamics of gold prices while enjoying the liquidity and flexibility offered by this investment avenue.
(Views expressed by the investment expert are his/her own. E-mail us your investment queries at [email protected]. We will get your queries answered by our panel of experts.)
