Gold ETF vs Gold Mutual Fund for NRIs: Which Investment Option Wins?
In a time when gold has delivered nearly 30% returns in the past year, Non-Resident Indians (NRIs) are increasingly looking toward gold-based investments to diversify their portfolios. Two standout options in the market are Gold Exchange-Traded Funds (ETFs) and Gold Mutual Funds. But which one is better suited for NRIs in 2025?
Let’s break down the differences, benefits, and considerations of both to help you make a confident investment decision.
Why Are Gold Investments Popular Among NRIs?
Gold continues to be a symbol of financial security and long-term growth. With average annual returns of 7.98% since 1971 and impressive recent gains, gold is now more than a cultural asset — it’s a global portfolio staple. NRIs are especially drawn to gold investments for three key reasons:
- Portfolio diversification
- Hedge against inflation and currency fluctuations
- Safe haven during market volatility
What Is a Gold ETF?
A Gold ETF is a market-traded instrument that represents physical gold. Each unit typically equates to 1 gram of 99.5% pure gold, and it trades on the stock exchange like shares.
Key Features:
- Requires a Demat account
- Real-time trading on stock exchanges
- Expense ratios range from 0.5% to 1%
- Passive management with direct gold price tracking
- Transparent and secure – no physical storage needed
Best For: NRIs with existing Demat accounts, who prefer active trading and low-cost exposure to gold.
Must Read: NRI Guide to Sovereign Gold Bonds: Rules, Loopholes & Alternatives
What Is a Gold Mutual Fund?
Gold mutual funds invest in gold ETFs and related gold assets such as mining company stocks and derivatives. They offer flexibility and systematic investment options through SIPs starting as low as ₹500.
Key Features:
- No Demat account required
- Actively managed by fund professionals
- Expense ratios range from 1% to 2%
- SIP options make it beginner-friendly
- Slightly broader exposure to gold-related sectors
Best For: NRIs who want a hands-off investment route with flexible contributions and professional fund management.
Gold ETF vs Gold Mutual Fund – Key Comparisons
| Feature | Gold ETF | Gold Mutual Fund |
|---|---|---|
| Demat Account | Required | Not required |
| Management | Passive | Active |
| Trading | Real-time on stock exchanges | Through fund house |
| Minimum Investment | 1 unit (1 gram gold) | ₹500 SIP |
| Expense Ratio | 0.5% – 1% | 1% – 2% |
| Liquidity | High (market hours) | Medium (redemption timelines apply) |
| Exposure | Direct to gold price | Indirect via ETFs and gold-related assets |
Performance Overview (2020-2025)
- LIC MF Gold ETF – 22.19% returns
- UTI Gold ETF – 22.11% returns
- UTI Gold Fund of Fund – 21.80% returns
- Average ETF Returns – 21.94%
- Average Gold Mutual Fund Returns – 21.30%
While ETFs slightly outperform mutual funds on returns due to lower costs, mutual funds still remain competitive, especially for long-term wealth building.
Taxation for NRIs
Thanks to the 2024 Indian budget update, both Gold ETFs and Gold Mutual Funds share the same tax structure:
- Long-Term Capital Gains (after 24 months): Taxed at 12.5%
- Short-Term Capital Gains (within 24 months): Taxed as per your income tax slab in India
Tip: NRIs should also consider Double Taxation Avoidance Agreements (DTAA) based on their resident country.
Cost, Charges & Hidden Considerations
| Cost Type | Gold ETF | Gold Mutual Fund |
|---|---|---|
| Expense Ratio | Lower (0.5–1%) | Higher (1–2%) |
| Exit Load | None | 1–2% if redeemed within 1 year |
| Additional Costs | Demat fees, storage | Management fees |
Gold ETFs may also show tracking errors, where ETF prices deviate slightly from real gold value due to regular sale of gold for administrative costs.
Rise of Digital Gold Platforms
Both ETFs and mutual funds are now accessible through digital investment platforms, making it easier for NRIs to manage gold investments remotely. These platforms offer:
- Real-time price tracking
- Fractional ownership
- Instant buy/sell options
- Insured storage and 24K purity guarantee
Over 75% of young investors (under 35) prefer digital platforms, and NRIs can use international accounts and mobile KYC for seamless onboarding.
Which Is Better for You?
Choose Gold ETFs if you:
- Already have a Demat account
- Want direct exposure to gold prices
- Prefer trading flexibility and lower costs
- Are an experienced or active investor
Choose Gold Mutual Funds if you:
- Don’t want the hassle of a Demat account
- Prefer SIP-based systematic investment
- Want professional fund management
- Are a beginner or long-term investor
Final Thoughts: What Should NRIs Do?
Gold continues to be a valuable addition to NRI portfolios. Both Gold ETFs and Gold Mutual Funds have proven their strength in 2025. Ultimately, the choice comes down to your investment style, access to trading accounts, and how actively you want to manage your portfolio.
ETFs are better for market-savvy investors with an active approach.
Mutual funds are ideal for NRIs seeking ease, discipline, and gradual wealth accumulation.
Most financial advisors recommend allocating 5-10% of your overall investment portfolio to gold for optimal diversification and protection against global volatility.
FAQs
Q: Can NRIs invest in gold mutual funds and ETFs in India?
Yes, NRIs can invest in both through NRE/NRO accounts, subject to FEMA regulations.
Q: Which gives better long-term returns – ETF or mutual fund?
ETFs generally edge out due to lower costs, but mutual funds offer more consistent returns through SIPs.
Q: Can I invest in gold through apps from abroad?
Absolutely. Many SEBI-registered platforms allow NRIs to invest digitally using Indian bank accounts.
Looking to invest in gold smartly in 2025? Whether you’re in Toronto, Dubai, or Sydney — gold is just a click away.
Explore trusted gold investment platforms and advisors verified by Indian.Community – your global NRI resource hub for smart investing, lifestyle tips, and more.
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