Investing gold FoF gold mutual fund

Gold Fund of Funds (FoF)

From WebNotes, a public knowledge base. Last updated 18 May 2026. Reading time ~6 min.

A Gold Fund of Funds (FoF) is a mutual fund scheme that invests in Gold ETFs of the same AMC, providing Indian retail investors folio-mode access to gold without requiring a demat account. The Gold FoF structure has been the dominant retail-friendly gold-investment route since the early 2000s, complementing the direct Gold ETF channel.

For Indian retail investors, Gold FoFs offer:

Folio-mode access: No demat-account requirement.
SIP-friendly: Easy systematic gold accumulation.
Operational simplicity: Standard mutual fund onboarding.
Lower minimum: Rs 100-500 minimum SIP.

The trade-off versus direct Gold ETF is the additional Gold FoF-level TER on top of the underlying Gold ETF TER.

Major Gold FoFs

SBI Gold Fund: Invests in SBI Gold ETF.
Nippon India Gold Savings Fund: Invests in Nippon India ETF Gold BeES.
HDFC Gold Fund: Invests in HDFC Gold ETF.
ICICI Prudential Regular Gold Savings Fund: Invests in ICICI Prudential Gold ETF.
Kotak Gold Fund: Invests in Kotak Gold ETF.
Aditya Birla Sun Life Gold Fund: Invests in ABSL Gold ETF.

Most major AMCs offer Gold FoFs alongside their Gold ETF offerings.

Structure

The Gold FoF:

Collects rupee subscriptions from investors.
Uses the proceeds to purchase units of the AMC’s own Gold ETF.
Holds the Gold ETF units in the FoF’s portfolio.
Issues FoF units to investors at the prevailing FoF NAV.

The FoF NAV closely tracks the underlying Gold ETF NAV, adjusted for the FoF-level TER.

Comparison with direct Gold ETF

Dimension	Gold FoF	Gold ETF
Holding mode	Folio	Demat
Demat account required	No	Yes
SIP convenience	High (standard MF SIP)	Limited (exchange trading)
TER	0.50-1.00% FoF + 0.50-0.80% ETF	0.50-0.80% only
Combined TER	1.00-1.80%	0.50-0.80%
Liquidity	T+2 redemption	Intraday exchange

Direct Gold ETF is cheaper but requires demat-account infrastructure. Gold FoF is simpler operationally but has higher combined TER.

Tax treatment

Post-April 2023 framework

Gold FoFs (like Gold ETFs) are treated as debt-oriented for tax under the post-2023 framework :

All gains taxed at slab rate as short-term regardless of holding period.
No long-term capital gains preference.
No indexation benefit (post-2023 purchases).

Pre-April 2023 purchases

Continue under pre-2023 LTCG treatment (36+ months for non-equity LTCG with indexation).

Role in portfolios

Gold allocation rationale

Gold typically serves:

Inflation hedge: Long-term protection against currency debasement.
Crisis hedge: During financial-market dislocations.
Currency hedge: USD-priced gold provides INR-depreciation hedge.
Portfolio diversification: Low correlation with equity.

Typical allocation

Conservative: 5-10 per cent in gold.
Moderate: 8-12 per cent.
Aggressive (with gold preference): 10-15 per cent.

Gold FoF vs sovereign gold bonds (SGBs)

Compared to Sovereign Gold Bonds (SGBs) :

SGBs: 2.5% annual interest + LTCG tax-free at maturity.
Gold FoF: No interest + slab-rate tax (post-2023).

SGBs are typically more tax-efficient than Gold FoFs for long-term gold allocation.

External references

References

SEBI (Mutual Funds) Regulations 1996.
AMFI scheme data on Gold FoFs.
Finance Act 2023 debt taxation amendment.

Reviewed and published by

WebNotes Editorial Team

The WebNotes Editorial Team covers Indian capital markets, payments infrastructure and retail investor procedures. Every article is fact-checked against primary sources, principally SEBI circulars and master directions, NPCI specifications and the official support documentation published by the intermediary in question. Drafts go through a second-pair-of-eyes review and a separate compliance read before publication, and revisions are tracked against the SEBI and NPCI rule changes referenced in the methodology section.

Last reviewed: 18 May 2026
Conflicts of interest: WebNotes is independent. No relationship with any broker, registrar or bank named in this article.