When it comes to protecting one’s money during economic uncertainty, gold investment is one of the preferred options for many due to safe haven tag associated with the precious metal. Amidst the current market scenario, where stocks are rattled and bond yields have slumped due to Trump’s reciprocal tariffs on major economies, investors seem to be running towards gold to park their money.
Now, with so many gold investment options available, the question arises – how do you invest in gold? Buying physical gold is no longer as preferable for many as it used to be. In such a situation, two options are easily available — gold ETFs and gold mutual funds. Both have their benefits of investing, but which one should you choose?
What are gold ETFs?
Gold ETFs (Exchange Traded Funds) are funds that invest in 99.5% pure gold. They are managed “passively”. Each unit is usually equal to 1 gram of gold. Gold ETFs are bought and sold in the stock market like stocks. To invest in it, you must have a demat account.
Also read: Trump tariffs drive investors to Gold! Here are 3 Gold ETFs to invest in right now
Advantages of investing in gold ETFs
One of the advantages with gold ETFs is that you do’t need to keep gold at home as everything is digital. Gold ETFs can be bought and sold instantly like shares and it is easy for investors to liquidate the investment and withdraw money when needed. Also, when you invest in gold ETFs you don’t need to be concerned about making charges, storage fee and insurance, which ultimately make ETF investment cheaper than physical gold.
Also, there is a complete transparency as gold ETFs are traded at real-time price. In addition to these, you can check the value of your investment whenever you want.
Who is it better for?
If you are a little familiar with the stock market and have a demat account, then gold ETF is a smart way for you to invest in gold—low cost, more flexibility and without the fear of theft or purity.
Gold Mutual Funds: Easy way to invest
Now suppose you don’t have a demat account, or you are not comfortable with trading in the stock market. What to do then?
This is where gold mutual funds come in, which actually invest in gold ETFs, but do not require a demat account to buy them. That means the same exposure, but in an easy way.
Benefits of gold mutual funds
Unlike gold ETFs, there is not need to have a demat account for gold mutual fund investment. Like in other mutual funds, one can start with a small amount through an SIP. While ETFs trade on exchanges, the timing of trade matters but no such time limitation is associated with gold funds, which gives ease of investing.
One thing to keep in mind is that since it includes the mutual fund house’s management and ETF-related fees, the expense ratio can be slightly higher.
Also read: Gold ETFs Vs Physical Gold: Where to invest? 10 to 15-year returns compared
Who is it better for?
If you are a new investor, want to start with a small amount or just want to keep investing simple, gold mutual funds are a great option for you.
Now, take a look at the performance of gold mutual ETFs and gold funds based on the returns both the products have delivered in the last 1 year. Their 3-year and 5-year returns are also mentioned to help investors develop a better understanding of these products based on returns in the long-term.
Top 5 Gold ETFs to invest in 2025
1. Axis Gold ETF
1-year return: 26.08%
3-year return: 18.37%
5-year return: 13.45%
2. HDFC Gold ETF
1-year return: 25.62%
3-year return: 18.26%
5-year return: 13.37%
3. ICICI Prudential Gold ETF
1-year return: 25.39%
3-year return: 18.35%
5-year return: 13.37%
4. Zerodha Gold ETF
1-year return: 25.36%
3-year return: Not Available
5-year return: Not Available
5. Aditya Birla Sun Life Gold ETF
1-year return: 25.52%
3-year return: 18.11%
5-year return: 13.20%
(Source of data: Value Research)
Also read: Physical Gold Vs Gold ETFs: Which is better? 5, 10 and 15-year returns compared!
Top 5 Gold Mutual Funds to invest in 2025
1. Quantum Gold Fund
1-year return: 25.52%
3-year return: 18.11%
5-year return: 13.20%
2. Aditya Birla Sun Life Gold Fund
1-year return: 25.18%
3-year return: 18.42%
5-year return: 13.21%
3. Quantum Gold Savings Fund
1-year return: 25.05%
3-year return: 18.22%
5-year return: 12.86%
4. Kotak Gold Fund
1-year return: 24.83%
3-year return: 18.13%
5-year return: 12.89%
5. Nippon India Gold Savings Fund
1-year return: 24.73%
3-year return: 18.09%
5-year return: 13.10%
(Source of Data: Value Research)
Gold ETF vs Gold Mutual Funds: What to choose?
Both options save you the hassles of physical gold—no storage, no fear of theft, no worries about purity. Both help you diversify your portfolio.
Choose gold mutual funds if you don’t have a demat account and you want to invest small amounts every month through SIPs. Also if you want ease and simplicity in investing since you are a beginner and want to take less risk, gold funds may suit you.
But, choose gold ETFs if you have a demat account and want real-time trading and liquidity. Also if you want to invest a large lump sum and prefer low expenses and more control, then golf ETFs are beneficial.
Also read: Sovereign Gold Bonds: Last chance to redeem THIS SGB tranche prematurely – Check details
Summing up
In the end, there is no right or wrong option — it all depends on your financial goals, risk appetite, and your investment acumen. If you want to invest in gold comfortably and build wealth slowly, gold mutual funds are for you. But if you are a slightly active investor and want better control at lower costs, then gold ETFs may be your choice.