Gold Funds vs ETFs: Which investment is more sensible during market fluctuations?

Gold prices saw a slight decline on Thursday, prompting investors to turn again to gold ETFs and gold mutual funds. Both options offer easy ways to invest in gold, but understanding the difference remains a challenge for many investors.

According to Certified Financial Planner Pallav Agarwal, after this year's meteoric rise, investing in gold could be risky in the short term. He says that if geopolitical tensions ease, gold prices could even fall. 

Meanwhile, Tanvi Kanchan, Head of Strategy at Anand Rathi, says that the choice of ETFs and Gold Funds depends on the investor's cost, liquidity, and convenience.

ETF vs Gold Funds: Which one gives better returns?

1. So far in 2025, Gold Funds have given an average return of 65%, while Gold ETFs have given an average return of 66%.
2. UTI Gold ETF gave the highest return of 67.58%.
3. Whereas Quantum Gold Saving Fund gave 66% return.
4. ETFs offer real-time trading, while Gold Funds can be invested in through SIPs without a Demat account.

Is it right to buy gold now?

1. Tanvi Kanchan explains that 2025 was a historic year for gold, with returns exceeding 60% and an all-time high of 50+ times. Two scenarios are possible going forward.
2. Soft Landing: Gold prices rise further by 10-15% due to interest rate cut.
3. Risk-Off Scenario: Gold can jump by 20-30% in case of recession or geopolitical tension.
4. Therefore, she advises investing gradually through SIP.

Are Multi-Asset Funds and Silver a better option?

Silver has also seen a strong rally this year. Multi-Asset Funds (Equity + Debt + Gold) have delivered better returns than Gold ETFs over the long term, with lower risk. 

Pallav Agarwal and Tanvi Kanchan both believe that at current prices, multi-asset funds may be a more balanced and safe option for ordinary investors, as they offer the benefits of investing in different asset classes.