Invest in gold without buying the metal. Learn how SIPs in gold mutual funds work, their benefits
Investing in gold has long been a preferred choice for those looking to diversify their portfolios and hedge against inflation or geopolitical risks.
Traditionally, investors had to buy physical gold or invest in exchange-traded funds (ETFs). However, there is now a simpler way to gain exposure to gold: through gold mutual funds and systematic investment plans (SIPs). Here is what you need to know.
What are gold mutual funds?
Gold mutual funds are primarily fund-of-funds that invest in gold ETFs. These ETFs, in turn, track domestic gold prices. This setup allows investors to participate in gold’s price movements without having to purchase or store physical gold.
Unlike direct ETF investments, which require a demat account, gold mutual funds are accessible through SIPs, making them more convenient for retail investors.
How does investing through SIP work?
A systematic investment plan allows investors to put a fixed amount of money into a gold mutual fund at regular intervals, typically monthly or quarterly. By spreading investments over time, SIPs help average out purchase costs, which can be particularly useful in a volatile asset such as gold. This is especially relevant now, as gold prices have experienced sharp rallies and corrections in recent months.
Why consider gold for diversification?
Gold has historically maintained a low correlation with equities, making it an effective diversification tool. During periods of market stress, such as wars or economic slowdowns, gold often holds its value better than riskier assets.
However, the current market phase is slightly different. Both equities and gold have corrected simultaneously due to global factors such as a strong US dollar and liquidity tightening.
Despite this, long-term investors continue to allocate to gold via SIPs, relying on its role as a hedge against uncertainty.
Several gold mutual funds have delivered strong returns over the past year, even before recent geopolitical tensions intensified.
What are the advantages of investing in gold through SIP?
Investing in gold via SIP offers several benefits for long-term portfolio planning:
- Reduces volatility by spreading investments over time.
- Provides a hedge against inflation and geopolitical risks.
- Avoids the challenges and security concerns of holding physical gold.
Are there any limitations?
Gold investments do not generate regular income, unlike equities or bonds. Returns depend entirely on price appreciation, which can be cyclical. Investors should understand that gains are largely capital-driven rather than income-driven.
(Disclaimer: The information provided in this article is for general guidance only. Readers are advised to consult a certified financial advisor before making any investment decisions.)
Published: 29 Mar 2026, 10:17 am IST
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