Gold has now made an ‘official’ entry into the goal-based long-term investment planning of investors. The new SEBI guidelines have allowed mutual fund companies to launch Life Cycle Funds with a specific allocation to gold and silver.
Life Cycle Funds are multi-asset funds with varying allocations in equity, debt, and gold. Until now, gold has never been part of the Sebi mandate in most equity and hybrid funds. Multi-asset funds have a mandate to invest in at least three asset classes with a minimum allocation of at least 10% each in all three asset classes, which includes gold and silver.
Life Cycle Funds, as the name suggests, aim to help investors meet life goals at a predetermined date. For example, while some investors may want to retire in 10 years, others may wish to do so in 20. Similarly, some people may want to save for a child’s education after 15 years, while others may want to do so after 20.
Life Cycle Funds are designed for people who have a specific target date in mind for meeting their retirement goal or their children’s education. Life Cycle Funds, therefore, are also called Target Date funds. Sebi defines Life Cycle Funds as open-ended funds with a target date maturity that use a glide path method and invest in a variety of asset classes, such as debt, equity, InvITs, ETCDs, gold ETFs, and silver ETFs.
Life Cycle Funds Target Dates
Mutual Funds may launch Life Cycle Funds with a minimum tenure of 5 years and a maximum tenure of 30 years. These schemes will have a fixed asset allocation structure.
In the initial years, a higher equity exposure will be allowed, which will keep decreasing as the maturity approaches, while adjusting the allocation for debt and other asset classes accordingly. The idea behind allocating more money to equity in the early years is that stocks often do better in the long run.
For instance, in a 30-year Life Cycle Fund, equity allocation may range between 65% and 95% when the fund has 15 to 30 years remaining to maturity. When the Years to Maturity reach 3-5 years, the allocation to equities will drop to 35-50%.
The Life Cycle Funds can be launched with maturities of 5-10-15-20-30 years. And, irrespective of the fund maturity, whether it is 5-10-15-20 or 30 years, the investment in Gold/Silver ETFs/ Exchange-Traded Commodity Derivatives/InvITs has been mandated to be kept at 0-10 %. This means a fund can choose not to invest in Gold/Silver ETFs, but if it chooses to invest, the maximum allocation can be up to 10%.
Gold, Silver ETFs New Rules
Allowing mutual fund investors to get exposure in Gold/Silver ETFs comes at a time when the rules around these commodity exchange-traded funds are being modified.
From April 01, 2026, Gold/Silver ETFs will value physical Gold and Silver based on polled spot prices published by recognized stock exchanges such as the Multi-Commodity Exchange of India Limited (MCX). Currently, Physical Gold and Silver in ETFs are valued at AM fixing prices set by the London Bullion Market Association (LBMA).
In addition, SEBI has proposed changes to the regulations concerning base price and price bands. SEBI proposed that there will be an initial price band of ±6%, which may be flexed up to ±20% during the trading day, subject to a cooling-off period. After exhausting the initial price band, there will be a cooling-off period of 15 minutes, and the price band will be flexed by 3%.
Gold has outperformed Nifty 50, real estate, and debt, establishing itself as the best-performing asset class over 1, 3, 5, 10, and 20-year periods. As of January 31, 2026, the Nifty 50 posted a CAGR of 12.6% over 20 years, as against 15.6% CGAR of the gold price in Indian Rupees over the same period.
Over a long period of 10 to 15 years, gold has historically provided returns that exceed inflation rates. However, it is important to note that there can be prolonged phases where returns from gold may be subdued or remain flat.
