Investing in gold doesn't offer capitalization benefits. Since gold doesn't generate interest or dividends, nothing is reinvested. When it comes to capitalization, mutual funds are one of the preferred investment options. In the long term, investing in “growth funds” yields good results thanks to capitalization.
This makes a clear difference between gold mutual funds and physical investment in gold. Although gold funds are more liquid than physical gold, they cannot be traded during the day (market hours in the stock markets). In addition, tangible gold in physical form is linked to its location. It is not easy to transport and should be stored in a safe place.
Instead of buying gold bars and coins, you can buy shares in a gold mutual fund or a gold exchange-traded fund. Now, when you find the main difference between gold mutual funds and gold ETFs, invest in the path that best suits your needs. By understanding the different characteristics between gold mutual funds and gold ETFs, you can hopefully determine which one best suits your investment strategy and financial objectives. While gold ETFs are financial vehicles that track the price of gold, gold mutual funds are basically a fund within a fund that can include ETFs, gold mining stocks, and other gold-related assets.
Compared to mutual or gold-listed funds, gold mining stocks offer investors more direct exposure to the precious metal. Gold mutual funds can move in the same direction as the spot price of gold because investments are correlated. Compared to gold ETFs, gold mutual funds offer slightly more exposure to risk because they invest in gold stocks, which tend to be price sensitive. There are many ways to invest in gold given the variety of investment vehicles available in the gold market.
Investors must manage their market risk, and gold funds are a great way to diversify their gold investments. Among all the gold investment options available in India, gold mutual funds and gold ETFs are considered to be a better option, since they simplify the process of buying gold, providing greater liquidity and safer gold accumulation. Gold mutual funds do not invest directly in physical gold, but rather adopt the same position indirectly when investing in gold ETFs. Some people may prefer to buy digital gold or gold ETFs instead of buying physical gold bars.
You can invest in professionally managed gold mutual funds or in gold ETFs, which can be easily traded on the market in a similar way to stocks. Gold mutual funds can also consist of the shares of companies engaged in mining, production, processing, and other activities associated with the life cycle of gold. During the day of trading on the stock exchanges, gold investors can easily enter and exit the shares of mutual funds in gold, making this investment in gold liquid. Like gold mutual funds, investing in gold through a gold ETF can be a convenient and accessible way to expose yourself to the safe haven asset.