Commodity Mutual Funds – Meaning, Benefits, and Types

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Last Updated On: 12 Aug 2025 | Created On: 23 May 2025

5 min read

Commodity mutual funds are investment funds that focus on commodities like gold, silver, oil, and agricultural products. These funds allow investors to participate in the commodities market without directly purchasing physical assets. They are an attractive option for diversifying a portfolio and hedging against inflation.

Commodity Mutual Funds in India

In India, commodity mutual funds primarily focus on gold funds and commodity ETFs. Some popular options include:

  • Gold ETFs and Gold Fund-of-Funds (FoFs).
  • Energy and mining sector funds.
  • International commodity funds (subject to SEBI guidelines).

How to Invest in Commodity Mutual Funds?

  1. Choose a Fund House or Broker – Select a SEBI-registered mutual fund provider.
  2. Complete KYC Process – Submit PAN, Aadhaar, and bank details.
  3. Select Investment Mode – Choose lump sum or SIP (Systematic Investment Plan).
  4. Monitor Performance – Track commodity market trends and fund performance regularly.

Who Should Invest in Commodity Mutual Funds?

  • Investors seeking portfolio diversification.
  • Those looking to hedge against inflation and currency fluctuations.
  • Medium- to long-term investors willing to accept commodity market volatility.

Conclusion

Commodity mutual funds provide a convenient way to gain exposure to gold, energy, agriculture, and metals without trading commodities directly. While they offer diversification and inflation protection, investors should be aware of market risks and economic cycles before investing.

By understanding commodity mutual funds, their types, and benefits, investors can make informed investment decisions and diversify their portfolios effectively.

For complete details:

https://www.hdfcfund.com/learners-corner/beginner/how-do-mutual-funds-invest-commodities

What is a Mutual Fund? - Beginner's Guide to Investing

AMFI - Introduction to Mutual Funds

Disclaimer:

The information is for general purposes only and not an investment advice. Readers should seek professional advice before taking any investment related decisions.

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FAQs

Yes, mainly gold funds, commodity ETFs, and sectoral funds.
 

Silver ETFs have recently been introduced but are limited compared to gold funds.
 

Some funds may offer dividends, but most focus on capital appreciation.
 

They reduce stock market risk, but commodity price fluctuations can be high.
 

Gold ETFs and commodity index funds are good options for first-time investors.
 

No, but exit loads may apply for early withdrawal.
 

Yes, some funds focus on agricultural commodity markets.
 

They typically outperform stocks and bonds during inflationary periods.
 

Yes, subject to SEBI and RBI guidelines on international investments.
 

Yes, they are suitable for long-term diversification and inflation hedging.
 

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An Investor Education And Awareness Initiative

Visit https://www.hdfcfund.com/information/key-know-how to know more about the process to complete a one-time Know Your Customer (KYC) requirement to invest in Mutual Funds. Investors should only deal with registered Mutual Funds, details of which can be verified on the SEBI website (www.sebi.gov.in/intermediaries.html). For any queries, complaints & grievance redressal, investors may reach out to the AMCs and / or Investor Relations Officers. Additionally, investors may also lodge complaints directly with the AMCs. If they are not satisfied with the resolutions given by AMCs, they may raise complaint through the SCORES portal on https://scores.sebi.gov.in/scores-home/. SCORES portal facilitates investors to lodge complaint online with SEBI and subsequently view its status. In case the investor is not satisfied with the resolution of the complaints raised directly with the AMCs or through the SCORES portal, they may file any complaint on the Smart ODR on https://smartodr.in/login.

The information is for general purposes only and not an investment advice. Readers should seek professional advice before taking any investment related decisions.

MUTUAL FUND INVESTMENTS ARE SUBJECT TO MARKET RISKS, READ ALL SCHEME RELATED DOCUMENTS CAREFULLY