Investing in Gold Funds: Know these first before you invest

Gold funds are topping with an average return of over 15 percent over the last year and 6.60-8.30 percent return for short-term of one to three months. With too many global uncertainties gold is riding high again as investors are looking for safe havens for their money.

If you are planning to invest in gold, you should keep in mind a few things.

No exceptional returns. Gold might shine brightly if global woes linger for a long time. Once things change, investors regain confidence and move to stocks and bonds and that will hit gold prices.

It is not an investment. Gold is not an investment option but is like an insurance premium to hedge against economic shocks.

Use it for Diversification. Invest in gold to diversify your portfolio across different asset classes.

Limit your exposure to gold. Limit your exposure to 5-10 per cent. A large exposure could offer stability, but it can also pull down the returns long term.

Subject to capital gains. They are subject to Capital Gains taxation rules as per the applicable criteria.

The value of gold fund varies. Gold funds are susceptible to the volatility of global as well as gold prices in India as they are directly linked to the market value of gold.