Gold ETFs vs Gold Mutual Funds in 2025: Which investment option should you pick?
Both instruments are classified as non-equity assets. Traditionally, units held beyond 36 months qualified for 20% tax with indexation. This significantly alters the post-tax attractiveness of gold investments for long-term investors.
- Oct 4, 2025,
- Updated Oct 4, 2025 10:37 PM IST
Gold continues to be a preferred safe-haven asset for Indian investors, but the mode of investment — Exchange Traded Funds (ETFs) versus Gold Mutual Funds — can make a significant difference in returns, costs, and convenience. In a recent post on X (formerly Twitter), CA Nitin Kaushik broke down the pros and cons of both investment vehicles, highlighting what investors should consider in 2025.
Structure and sccess
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Gold ETFs are traded on stock exchanges, requiring a demat and trading account. They offer real-time pricing and intra-day liquidity, with lower expense ratios (around 0.5-1%). However, brokerage charges and bid-ask spreads apply.
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Gold Mutual Funds, on the other hand, do not require a demat account. Investors can start with SIPs as low as ₹500 per month. NAVs update only once a day, expense ratios are slightly higher (1-1.2%), and some schemes carry exit loads.
Liquidity & returns
Liquidity is a key differentiator. “ETFs let you buy and sell instantly during market hours, while Gold Funds only redeem at end-of-day NAV,” Kaushik noted. Returns also vary slightly. Assuming gold grows at 8% CAGR over five years:
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ETF returns may net around 8%
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Gold Funds may deliver 7.5% For a ₹10 lakh investment, this difference compounds — growing to ₹14.7 lakh with ETFs versus ₹14.4 lakh with funds.
Taxation changes
Both instruments are classified as non-equity assets. Traditionally, units held beyond 36 months qualified for 20% tax with indexation. However, Kaushik flagged an important update, “For units bought on or after April 1, 2023, under Section 50AA, all gains may be treated as short-term — meaning no indexation benefit.”
This significantly alters the post-tax attractiveness of gold investments for long-term investors.
Who should invest in what?
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ETFs: Best suited for active investors, cost-conscious buyers, and those comfortable with demat accounts who want flexibility and intra-day liquidity.
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Gold Mutual Funds: Ideal for beginners, SIP investors, and those who prefer ease of access without opening a demat account.
Kaushik also pointed out that ETFs held in demat form can sometimes be pledged as collateral for loans — though this depends on the lender.
With inflation, currency volatility, and central bank buying supporting gold demand, Kaushik concluded that the yellow metal remains a strong hedge in 2025. “ETFs score on cost and liquidity. Funds win on simplicity and automation. Choose what fits your style — gold will shine either way,” he wrote.
Gold continues to be a preferred safe-haven asset for Indian investors, but the mode of investment — Exchange Traded Funds (ETFs) versus Gold Mutual Funds — can make a significant difference in returns, costs, and convenience. In a recent post on X (formerly Twitter), CA Nitin Kaushik broke down the pros and cons of both investment vehicles, highlighting what investors should consider in 2025.
Structure and sccess
-
Gold ETFs are traded on stock exchanges, requiring a demat and trading account. They offer real-time pricing and intra-day liquidity, with lower expense ratios (around 0.5-1%). However, brokerage charges and bid-ask spreads apply.
-
Gold Mutual Funds, on the other hand, do not require a demat account. Investors can start with SIPs as low as ₹500 per month. NAVs update only once a day, expense ratios are slightly higher (1-1.2%), and some schemes carry exit loads.
Liquidity & returns
Liquidity is a key differentiator. “ETFs let you buy and sell instantly during market hours, while Gold Funds only redeem at end-of-day NAV,” Kaushik noted. Returns also vary slightly. Assuming gold grows at 8% CAGR over five years:
-
ETF returns may net around 8%
-
Gold Funds may deliver 7.5% For a ₹10 lakh investment, this difference compounds — growing to ₹14.7 lakh with ETFs versus ₹14.4 lakh with funds.
Taxation changes
Both instruments are classified as non-equity assets. Traditionally, units held beyond 36 months qualified for 20% tax with indexation. However, Kaushik flagged an important update, “For units bought on or after April 1, 2023, under Section 50AA, all gains may be treated as short-term — meaning no indexation benefit.”
This significantly alters the post-tax attractiveness of gold investments for long-term investors.
Who should invest in what?
-
ETFs: Best suited for active investors, cost-conscious buyers, and those comfortable with demat accounts who want flexibility and intra-day liquidity.
Advertisement
-
Gold Mutual Funds: Ideal for beginners, SIP investors, and those who prefer ease of access without opening a demat account.
Kaushik also pointed out that ETFs held in demat form can sometimes be pledged as collateral for loans — though this depends on the lender.
With inflation, currency volatility, and central bank buying supporting gold demand, Kaushik concluded that the yellow metal remains a strong hedge in 2025. “ETFs score on cost and liquidity. Funds win on simplicity and automation. Choose what fits your style — gold will shine either way,” he wrote.