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Mutual Fund Schemes with Exposure to Gold

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Most financial experts don't recommend investing in gold these days. However, some of them are suggesting mutual fund schemes that invest in gold, along with other asset classes like equity and debt, to their clients. It is strange that despite its modest performance last year, nobody is bullish on the yellow metal. Then why do they advise investing in schemes with exposure to gold?


Conservative investors should look at these funds as they offer moderate exposure to equity and gold and save the investors from the hassles of rebalancing the portfolio from time to time, also believes that it makes sense to invest in these funds now.

"Especially at a time, when equity markets are hitting new peaks, one should avoid timing the market and consider investing in an asset allocation fund that has an exposure across asset classes and help rebalancing from time to time," says Kothari.

However, the performances of these funds in the last three years reveal that their returns are in line with fixed deposit returns. "Equities and gold did not do well in the last three years and that has impacted the performance," explains Das. While Nifty gave 8.63% returns, gold registered a 7% appreciation in the last three years. However, many experts feel that these funds might post better returns in the next few months due to the buoyancy in the stock market.


However, they are quick to point out that conservative investors should not place much emphasis on it. Jignesh Shah, investment advisor of Capital Advisors says, Conservative investors should stick to their asset allocation and should consider these funds offering exposure across asset classes to achieve their financial goals without losing peace of mind .

 

Experts also emphasize on the importance of investment horizon and asset allocation of the fund.


Monthly income plans such as Religare MIP Plus and Taurus MIP Advantage invest minimum 65% in fixed income instruments and the rest in gold and equity . Kotak Multi Asset Allocation Fund invests minimum 75% in debt and the rest in equity and gold. Axis Triple Advantage Fund invests 30-40% in equity and debt and 20-30% in gold.

The issue with funds that have low equity allocation, especially MIP, is that their expense ratio is on the higher side as compared to income funds and they don't generate commensurate extra returns as compared to income funds consistently. Axis Triple Advantage Fund in this category due to its higher allocation to equity .

He asks investors to get it with a minimum five-year time frame to ensure that one benefits from an entire economic cycle. In the short term, these funds can be erratic.

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