Invesco India Gold ETF offered the highest return of around 10.03% in 2024 so far. Nippon India ETF Gold BeES, the oldest and largest gold fund, gave a return of 9.35% in 2024 so far.
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Urinary tract infection Silver ETF FoF, a silver fund, offered the highest return of 10.74% so far in 2024. Axis Silver FoF returned 10.43% over the same period. Nippon India Silver ETFThe largest silver fund in terms of assets under management, it returned 8.93% over the same time period.
Since both commodity-based mutual funds offer similar returns, experts believe that high interest rates and geopolitical instability have helped these funds achieve this performance.
“High global interest rates and geopolitical situations have led to a surge in gold prices in recent years,” said Manish Kothari, co-founder and CEO of ZFunds.
The other expert also shares a similar view and believes that the rise in gold and silver prices has helped the performance of funds tracking these metals.
“Rising gold and silver prices have helped the performance of funds tracking these metals. The rise in gold prices can be attributed to multiple factors including geopolitical instability, increased gold purchases by central banks, higher inflation and the expectation of interest rate cuts in the US. Rising gold prices have also influenced the prices of other precious metals like silver. The appreciation in silver prices is also due to its industrial use including the renewable energy sector, which is expected to boost demand for this metal in the coming years,” commented Nilesh D Naik, Head – Investment Products, Share.Market.
Compared to gold funds, silver funds are relatively new entrants to the market and have been around since 2022.
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In the last six months, silver commodity-based mutual funds have outperformed gold funds. Silver funds gave an average return of 13.13%, while gold funds offered an average return of 11.24% in the last six-month period.
UTI Silver FoF ETF offered the highest return of around 15.26% in the last six months. LIC MF Gold ETF FoF achieved a return of 11.28% during this period.
These two categories of commodity-based mutual funds lost almost equally in the last three-month period. Gold funds lost 2.90% and silver funds lost around 2.36% in the last six-month period.
Are you interested in investing in these funds? What should be the assignment in commodity-based mutual funds with respect to the briefcase?
“Gold prices tend to be less volatile compared to silver prices as the latter are also influenced by industrial demand for the metal. Moreover, gold as an asset class acts as a good hedge against inflation and is also known to be resilient to financial and economic crises. It can also act as a complementary asset class to equities and fixed income in an investor’s portfolio. Hence, an allocation of 10-15% to gold is considered optimal from a long-term perspective,” Naik recommends.
The other expert recommends taking exposure to gold funds, either by investing directly in a gold fund or through a multi-asset fund that invests in gold along with equities and debt.
“Long-term investors should consider investing in gold funds as part of asset allocation. Gold prices are inversely correlated with other growth assets such as equities and hence offer good diversification for the portfolio. Investors should consider an exposure to gold of between 10-20%. This can be done by investing directly in a gold fund or through multi-asset funds, which invest in gold along with equities and debt,” suggests Kothari.
Gold and silver funds are used to diversify your portfolio. If you have a large portfolio, you can allocate a small percentage of your total portfolio (advisors say around 10%) to investing in gold and/or silver. If you are just starting out or have a very small portfolio, you may want to pass up this opportunity. Investors should remember that these funds will not offer you higher returns year after year. They are supposed to offer you diversification and add stability to your portfolio.
(Disclaimer:The recommendations, suggestions, views and opinions of the experts are their own and do not represent the views of The Economic Times.
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