Gold Funds, Gold ETFs and Sovereign Gold Bonds

Gold is usually held as a diversifier — it often moves independently of equity — rather than as a primary growth asset. There are three practical ways to own it in financial form.

Gold ETF

Listed units backed by physical gold, tracking bullion prices closely at a low expense ratio. Requires a demat account, and you transact at market price, so check liquidity and the bid-ask spread.

Gold fund (FoF)

A fund of funds that holds a gold ETF underneath. No demat account needed and SIPs are straightforward, at the cost of a slightly higher total expense ratio than the ETF alone.

Sovereign Gold Bonds

Government-issued bonds tracking the gold price and paying additional interest, with a long maturity and favourable treatment if held to maturity. Availability depends on the government issuing new tranches, and secondary-market liquidity can be thin.

How much to hold

Gold produces no earnings or dividends, so its return relies purely on price. Most allocation frameworks suggest a modest slice — commonly in the 5–15% range — as ballast rather than a core holding.