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 9.35% return in 2024 so far.
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UTI Silver ETF FoF, a silver fund, offered the highest return of 10.74% in 2024 so far. Axis Silver FoF gave 10.43% return in the same time period. Nippon India Silver ETF, the largest silver fund based on assets managed, gave 8.93% return in the same time period.
With both commodity based mutual funds offering similar returns, experts believe that high interest rate and geo-political instability have helped these funds deliver this performance.
“High interest rates globally and geo-political situations have led to a rise in gold prices over the last couple of years,” said Manish Kothari, Co-founder & CEO, ZFunds.
The other expert also shares a similar opinion and believes that the surge in prices of gold and silver has aided the performance of funds tracking these metals.
“The surge in prices of gold and silver has aided the performance of funds tracking these metals. The increase in gold prices can be attributed to multiple factors including geopolitical instability, increased gold buying by central banks, higher inflation and the expectation of interest rate cuts in the US. The higher gold prices have also influenced the prices of other precious metals like silver. Appreciation in silver prices is also due to its industrial use, including in the renewables energy sector which is expected to drive the demand for this metal in the coming years,” commented Nilesh D Naik, Head of Investment Products, Share.Market.
Compared to gold funds, Silver funds are comparatively new entrants in the market and have been around since 2022.
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In the last six months, Silver commodity based mutual funds have offered more than gold funds. Silver funds gave an average return of 13.13% whereas gold funds offered an average return of 11.24% in the last six month period.
UTI Silver ETF FoF offered the highest return of around 15.26% in the last six months. LIC MF Gold ETF FoF delivered 11.28% return in the said period.
These two commodity based mutual fund categories 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 months period.
Are you interested in making investments in these funds? What should be the allocation in commodity based mutual funds with respect to the portfolio?
“Gold prices tend to be less volatile compared to silver as the latter are also influenced by the 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. As such ~10-15% allocation to gold is considered optimal from a long term perspective,” recommends Naik.
The other expert recommends taking an exposure to gold funds either by directly investing into a gold fund or through a multi-asset fund which invests in gold alongside equity and debt.
“Long-term investors should look at investment in gold funds as a part of asset allocation. Gold prices are inversely correlated to other growth assets like equity and hence offer good diversification to the portfolio. Investors should look at around 10-20% exposure to gold. This can be done by investing directly into a gold fund or through multi-asset funds, which invest in gold alongside equity and debt,” suggests Kothari.
Gold and silver funds are used for portfolio diversification. If you have a large portfolio, you can earmark a small percentage of the total portfolio (advisors say around 10%) to invest in gold and/or silver. If you are starting out or you have a very small portfolio, you can give it a miss. Investors should remember that these funds wont offer you greater returns year after year. They are supposed to offer you diversification and add stability to your portfolio.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)
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