I'm 31 years old and want to invest in gold as a part of diversification. Is it wise to invest in gold like our purchasing goldbars/biscuit or as a complete product like chain or necklace. Thanks in advance

Ans: Gold can be a valuable addition to your portfolio. It has always been considered an asset that can hedge against inflation and other economic uncertainties. There are three popular ways to invest in gold.

Gold ETFs (Exchange-Traded Funds): Gold ETFs offer easy liquidity, as they are traded on stock exchanges just like stocks. They provide a direct exposure to the price of gold.
Taxation - Profits on the sale/redemption of Gold ETFs or units of gold saving funds bought after 31st March 2013 will be taxed as short capital gains irrespective of the holding period. So, this will be taxed as per an individual’s current tax slab.

Gold Mutual Funds: Gold mutual funds pool investments from multiple investors and provide professional fund management. They are an excellent choice for those who prefer a diversified approach.
Expense ratios and load fees can vary.
It is advisable to keep the investment in gold within 5% to 10% of one’s total investment portfolio.
Taxability is similar to that of Gold ETFs.

Sovereign Gold Bonds (SGBs): SGBs are issued by the Government of India and they provide an additional annual interest income. SGBs are suited for long-term investors who are looking for a safe haven asset and are willing to hold on to their investment for at least 5 years, preferably full 8 years to get the tax advantage of Zero capital gains tax on gains made.
The returns on SGBs are not guaranteed, and they depend on the prevailing market price of gold at the time of sale. There is a lock-in period of 5 years, so you cannot exit your investment before then.

SGBs may be the right choice. If liquidity and trading flexibility are important, consider Gold ETFs. Gold mutual funds are suitable for diversification, doing SIPs and professional management.

Ans: Including gold in your investment portfolio can offer diversification and act as a hedge against inflation and market volatility. However, the costs associated with purchasing and storing physical gold, such as making charges, GST, and safe storage costs, can impact your returns. Here are some recommendations on how to include gold in your portfolio and the suggested percentage allocation:

Gold ETFs or Gold Mutual Funds:

Advantages: Gold ETFs (Exchange Traded Funds) and Gold Mutual Funds offer a cost-effective way to invest in gold without incurring making charges or GST.
Allocation: Consider allocating 5-10% of your investment portfolio to gold ETFs or Gold Mutual Funds to diversify your portfolio and mitigate risks.
Gold Savings Fund:

Advantages: Gold Savings Funds invest in gold ETFs and offer the convenience of SIP (Systematic Investment Plan) investments. They also provide the benefit of professional fund management.
Allocation: You can allocate a portion of your monthly SIP towards Gold Savings Funds to accumulate gold over time.
Sovereign Gold Bonds (SGBs):

Advantages: SGBs are government-backed securities denominated in grams of gold. They offer an annual interest rate and capital gains tax benefits if held until maturity.
Allocation: Consider investing in SGBs as part of your fixed income allocation, keeping in mind the lock-in period and liquidity constraints.
Physical Gold Coins or Bars:

Advantages: Physical gold offers tangible ownership and can be a part of your emergency reserve or long-term wealth preservation strategy.
Allocation: If you prefer physical gold, limit the allocation to a smaller percentage (e.g., 1-2% of your portfolio) due to the additional costs and liquidity constraints.
Recommendations:

Diversification: Include gold as a part of your diversified investment portfolio to mitigate risks and enhance overall returns.
Cost Consideration: Opt for cost-effective investment options like Gold ETFs, Gold Mutual Funds, or Gold Savings Funds to avoid high making charges and GST.
Asset Allocation: Maintain a balanced asset allocation based on your risk tolerance, investment goals, and time horizon. A typical allocation to gold ranges from 5% to 10% of the total portfolio.
Regular Review: Periodically review your investment portfolio and rebalance as needed to maintain the desired asset allocation and align with your financial goals.
Consult with a financial advisor to determine the most suitable allocation to gold based on your individual financial situation, goals, and risk tolerance. They can provide personalized recommendations and guidance to help you make informed investment decisions.

Ans: Gold Mutual Funds are an excellent way to invest in gold without the hassle of buying physical gold. They invest in gold ETFs, allowing you to benefit from gold's price movements. These funds are managed by professionals, which adds a layer of expertise to your investment. Gold MFs are convenient, as they don’t require a Demat account, making them accessible for most investors.

Advantages of Gold Mutual Funds

Professional Management: Experienced fund managers handle the investments.

Ease of Access: No need for a Demat account; you can invest directly through your bank or mutual fund distributor.

Diversification: Gold acts as a hedge against inflation and adds balance to your portfolio.

Why Choose Gold MFs Over Other Gold Investments?

Gold MFs offer the convenience of systematic investments through SIPs, which can help average out the cost. Unlike physical gold, there are no worries about storage or safety. While Sovereign Gold Bonds offer interest, Gold MFs provide liquidity and flexibility, which is crucial if you might need to redeem your investment quickly.

Final Thoughts

Gold Mutual Funds are a solid choice for adding gold to your portfolio. They offer a hassle-free, professionally managed way to invest in gold, balancing your portfolio and providing protection against market volatility. If you’re looking for a simple yet effective way to invest in gold, Gold Mutual Funds are the way to go.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

Ans: Investing in Gold Funds: A Comprehensive Guide
Gold has always been a valuable and popular investment. People invest in gold to diversify portfolios, hedge against inflation, and preserve wealth. When it comes to investing in gold, many think of Gold ETFs (Exchange-Traded Funds). But there's a better option: Gold Funds.

Let's explore why gold funds are a better choice and understand the nuances of investing in them.

Understanding Gold Funds
Gold funds are mutual funds that invest in gold-related assets.

These funds offer a simpler and more flexible way to invest in gold without worrying about storage or security.

No Impact Cost
One of the main advantages of gold funds is that they don't have an impact cost. Impact cost refers to the cost of buying and selling assets in the market, which can affect the overall returns. Gold ETFs, being traded on exchanges, are subject to this cost. Gold funds, on the other hand, are not, as they deal directly with the fund house.

Liquidity and Flexibility
Gold funds offer high liquidity. You can buy or sell units of the fund at any time without worrying about market conditions. This flexibility is not available with physical gold investments. It allows investors to take advantage of market movements and manage their investment strategy more effectively.

Systematic Investment Plans (SIPs)
One of the most significant benefits of gold funds is the ability to invest through Systematic Investment Plans (SIPs). SIPs allow you to invest a fixed amount regularly, making it easier to accumulate gold over time. This disciplined approach helps in averaging the purchase cost and mitigating the impact of market volatility.

Asset Allocation
Review the asset allocation strategy of the gold fund. A well-diversified portfolio with a mix of physical gold and gold-related securities can provide better risk-adjusted returns. Ensure the fund's asset allocation aligns with your investment goals.

Risk Factors
Every investment comes with its risks, and gold funds are no exception. Understand the risks associated with gold funds, such as market volatility, geopolitical factors, and currency fluctuations. Assess your risk tolerance before investing.

Investment Horizon
Your investment horizon plays a crucial role in choosing the right gold fund. If you have a long-term investment horizon, you can benefit from the compounding effect and potentially higher returns. Short-term investors should consider funds with lower volatility.

Comparing Gold Funds and Gold ETFs
To make an informed decision, it's essential to compare gold funds with Gold ETFs. This comparison will highlight the benefits and drawbacks of each option, helping you choose the best investment for your needs.

Cost of Investment
Gold ETFs involve brokerage fees, impact costs, and other transaction charges. These costs can eat into your returns. Gold funds, with their no-impact cost structure, offer a more cost-effective investment option.

Convenience
Gold funds are more convenient as they don't require a demat account or trading account. You can invest in gold funds through mutual fund distributors or directly with the fund house. This simplicity makes gold funds accessible to a broader audience.

Redemption Process
Redeeming Gold ETFs involves selling them on the stock exchange, which can be affected by market conditions and liquidity. Gold funds offer a smoother redemption process with direct transactions with the fund house, ensuring timely access to your money.


As a Certified Financial Planner, I understand the importance of aligning investments with your financial goals and risk tolerance. Investing in gold is not just about returns; it's about preserving wealth, ensuring financial security, and achieving peace of mind. I appreciate the trust you place in my guidance and aim to provide recommendations that meet your unique needs.


I commend you for taking the initiative to explore investment options and make informed decisions. Investing in gold funds shows your commitment to diversifying your portfolio and securing your financial future. It's a prudent choice that reflects your understanding of market dynamics and your willingness to explore smarter investment avenues.

Benefits of Investing Through an MFD with CFP Credential
Investing through a mutual fund distributor (MFD) with a Certified Financial Planner (CFP) credential offers several advantages. These professionals provide personalized advice, helping you choose the right funds based on your financial goals, risk tolerance, and investment horizon. They also offer ongoing support and guidance, ensuring your investments stay on track.

Final Insights
Investing in gold funds is a smart choice for diversifying your portfolio, hedging against inflation, and ensuring financial security. Gold funds offer several advantages over Gold ETFs, including no impact cost and liquidity. By considering factors such as fund performance, fund manager expertise, expense ratio, asset allocation, and risk factors, you can make an informed investment decision.

Choosing gold funds through a mutual fund distributor with a Certified Financial Planner credential adds another layer of security and expertise to your investments. It ensures personalized advice and ongoing support, helping you achieve your financial goals.

Thank you for your proactive approach to managing your finances and your trust in my guidance. Investing in gold funds reflects your commitment to making informed and strategic investment decisions. It's a prudent step towards securing your financial future and achieving peace of mind.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in