ETF vs Mutual Fund vs Digital: Which Is The Best Way to Invest In Gold As the Yellow Metal Rally Pauses?

ETF vs Mutual Fund vs Digital: Gold prices in India have recorded a remarkable surge since the start of 2025, marking one of the strongest rallies in recent years. After touching record highs, the precious metal witnessed a sharp correction in the latter half of October. The pause in the rally has created, what many investors view as an attractive entry point for fresh allocations into gold-linked investments.

Other than purchasing physical gold, there are ample instruments like exchange-traded funds (ETFs), gold mutual funds, and even digital gold to invest in the precious metals. But which is the best way to invest in gold?

To answer this question, let's understand the three most popular methods of investment in gold (other than purchasing it in physical form).

Gold ETF

If you are a stock market investor looking to add gold in your portfolio, then gold ETF could be one of the best choices. Gold ETF is a type of investment where the prices of the precious metals track that of physical gold. The units of gold ETFs are traded on stock exchanges. Each unit of a gold ETF represents a quantity of gold. Hence, gold ETF investment means, investing in gold without physically holding it.

How To Choose The Right Gold ETF?

Investors can keep few basic things in their minds while starting gold ETF investment. Check the past performance of different gold ETFs. Firms like Nippon, SBI Mutual Fund, Kotak, etc offer their own gold ETF schemes. Comparing the asset under management (AUM), average returns, expense ratio, etc, can help investors in choosing the the right gold ETF.

Gold Mutual Fund

Gold mutual funds are a safer option for risk-averse investors. A gold mutual fund pools money from retail investors and primarily put the money in different gold ETFs and other gold related assets.

How To Choose a Gold Mutual Fund?

Comparing factors like long-term returns, fund size, holdings, expense ratio, exit load ratio, and fund managers, can help in identifying a suitable gold mutual fund.

Digital Gold

Digital gold is nothing but a 24 carat 99.9% pure gold investment without the burden of storage. It is invested through online mode via internet banking or UPI transaction. PhonePe, Jar, Groww, Fiydaa, and Google Pay, and several other platforms offer the option to invest in digital gold and digital silver. Additionally, direct refinery sites like MMTC-PAMP and eBullion, also offer the facility.

Which Is The Best Way To Invest In Gold?

There are multiple options to invest in gold, and they cater to investors with a different range of risk appetites.

"Gold ETFs are the most disciplined option because they offer full price transparency, low costs, and no storage concerns. Gold mutual funds work for SIP investors, but over time, returns get diluted by management fees. But while digital gold is convenient, the regulatory vacuum and counterparty risk it carries make it unsuitable for long-term wealth planning," believes Siddharth Maurya, Founder & Managing Director, Vibhavangal Anukulakara Pvt. Ltd. However, Maurya urges investors to select the gold investment option with caution by calculating all the pros and cons.

Disclaimer: The views and recommendations expressed are solely those of the individual analysts or entities and do not reflect the views of Goodreturns.in or Greynium Information Technologies Private Limited (together referred as "we"). We do not guarantee, endorse or take responsibility for the accuracy, completeness or reliability of any content, nor do we provide any investment advice or solicit the purchase or sale of securities. All information is provided for informational and educational purposes only and should be independently verified from licensed financial advisors before making any investment decisions.