IDBI Gold ETF

The IDBI Gold Exchange Traded Fund (ETF) is an open ended gold exchange traded scheme which are brought and sold via stock exchanges via any stock trading platforms.  Only during the NFO you can buy these via a regular paper application and after it reopens you can only buy via your demat account.  Hence demat account is mandatory to buy such gold ETFs in India and the same applies for this fund as well.

NFO: The IDBI Gold ETF NFO is open from October 19, 2011 and closes on November 17, 2011.  It reopens for regular buying and selling via demat account from November 17, 2011.  You can get the application of this fund from the select IDBI Bank Branches.  The price of the unit during NFO is Rs. 100 per unit.  The minimum application that you can buy during this time is Rs. 10,000 and in multiples of Rs. 1.  There is no entry or exit load applicable for this gold ETF fund since buying and selling happens via online trading.

Investment and Asset Allocation

The IDBI Gold Exchange Fund will invests 95-100% in gold and 0-5% in money market and debt funds.  The primary objective of this fund is to get capital appreciation by investing primarily in physical gold in India.  The benchmark being domestic price of the gold in India.  You can only buy and sell the units of this fund via demat account and hence it is mandatory.

Advantages of IDBI Gold ETF

• Purity of gold is guaranteed at 99.5%
• Most liquid form of gold that you can own
• Virtual gold and hence safety is 100% guaranteed
• Low cost to own gold and safe keeping unlike physical gold
• No wealth tax involved unlike jewellery or physical gold
• Most tax efficient form of gold
• Transparent pricing and no hidden charges when buying and selling

Gold Loan against ETF

There is also an option of getting loan against ETF from select gold financing companies and hence you can opt for it if you need cash urgently rather than selling them for the same.  This is also an upcoming option which is making gold ETFs the most best way to own gold.

The above advantages not only is applicable for IDBI Gold ETF Fund but also is the same for any other gold ETFs available in India at the moment and hence they are the best way to buy gold if you are looking at it only in the perspective of investment.  So if you are looking to buy gold then go for any of the existing ETFs or the above mentioned IDBI Gold ETF.

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NFO Open: September 20, 2011

NFO Closes: October 4, 2011

Investment Objective: The primary investment objective of the ICICI Prudential Regular Gold Savings Fund is to get returns by investing in gold via the ICICI Prudential Gold ETF fund.

Allocation: This ICICI Gold Savings Fund will primarily invest up to 95% to 100% in ICICI Gold ETF while the balance 0% to 5% in money market or debt instruments.

Minimum Investment: Rs. 5000 and for SIP the minimum amount is Rs. 1000 and and in multiples of Rs. 1 and above.  The NFO price for each unit is Rs. 10.  After the NFO, you can buy the units at the existing price prevailing.

Entry and Exit Loads: There will be no entry load for this fund while there is a 2% exit load if redeemed or switched within 1 year of the investment.

Options: Growth, dividend payout and reinvestment options.  The default option will be growth.

Benchmark: The domestic price of gold.

Advantages of Regular Gold Savings Fund

• Option to invest via SIP
• No wealth tax
• No storage or safety worries
• Demat account is not needed
• Purity guaranteed
• Liquidity and convenience
• Far better than buying jewellery

Fees and Charges

Apart from the 1%-1.5% fee as fund charges, you will also need to bear the cost involved in the fund management charges involved with ICICI Pru Gold ETF Fund.  Hence there is double charges involved in investing in this ICICI Prudential Gold Savings Fund.  This has been the case of all the previous gold savings fund which have come up in the recent past.  Also there is an exit load of very high 2% if you redeem it before 1 year.

Opinion

Other than that if you already have a demat account and can by gold ETFs at regular intervals, i.e., whenever there is a dip in gold price, then this fund holds no purpose for you, and hence can avoid this fund.  But if you don’t have a demat account and have not invested in any of the previous NFOs of the gold funds and looking to invest in gold each month, then go ahead and try this ICICI Prudential Regular Gold Savings Fund for your gold investment needs.  But invest via the SIP option which is the better and also choose very long term for better returns in gold via SIP which is the only best advantage that these gold funds have brought to the retail customers of late.

But make sure you don’t cross more than 10% in this fund from your overall portfolio as that is the limit you can go for any gold investments just as a hedge against inflation and you should not over stock your portfolio with only gold in it.

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Muthoot Finance which is India’s largest gold finance NBFC announced this new development of offering loan against gold ETFs which is a totally new vertical and new option for the retailers like us who have recently ventured into Gold ETFs in India and getting loan against it can be even beneficial in case we need money urgently.

This new Gold ETF loan will be available initially only at the 30 branches of Muthoot Finance but will be later introduced to their other 3000+ branches across India.

This new loan against ETF can prove beneficial for those who are in need of money urgently and don’t want to sell their existing Gold ETF units held at their demat account.  The loan amount will be 85% of the total net asset value (NAV) of the Gold ETF units being held.

How you can avail Gold ETF Loan and details are yet to be announced, but I guess this will just like pledging your securities for loan which we already do for getting loans against our securities held in demat account and this is how Muthoot could offer their loans for ETFs for us.  But we will need to wait and see how it works out once they spread it across India from their existing 30 branches.

This Gold ETFs Loan can be ideal who have in fact brought on a huge chunk of units on them and don’t want to sell them right now but are in dire need of cash but it is not advisable for all due to the percentage involved here, which is around 15% for gold loans with gold exchange traded funds.

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Gold ETF

Each unit in gold ETF means that you are buying 1 g of physical gold.  There are various mutual fund companies which offer these Gold ETF namely Benchmark (Goldbees), Reliance Gold ETF, SBI GETS, Quantum Gold ETF, Kotak Gold ETF, etc.  You can just buy the gold units from any one of the above mentioned mutual fund services via your online trading account.

Demat Account

The first and foremost thing that you need to have to invest in Gold ETF in India is to have your own demat account as well as an online trading account.  The demat account is being provided by NSDL and CDSL and there are various depositary participants (DPs) in which you can get it opened along with your online trading account where you actually buy and sell the stocks and here in this case the gold ETF.  During opening you will be asked to provide your bank details to link it with your account and so that you can transact either withdraw or add-in cash and vice versa.

How to Buy

After opening both online trading and demat accounts, just login to your online trading account search for any of the above mentioned gold ETF available either at the NSE or BSE stock exchanges.  Most of them are listed in both exchanges.  After doing so, just add them to your new list and look for the current price in which the gold ETF units are being sold and just go ahead and start buying them whenever you feel the price of it is fallen or lower than the previous days gold price, etc.  The minimum share or unit you can buy in gold ETF is 1.  But Quantum MF offers a special Gold ETF plan where you get to buy the half gram of gold and hence you can even buy that if you feel that is ideal for you.

After buying by paying the requisite amount, the gold ETF (gold share) that you have brought will reflect in your DEMAT account within 3 to 7 days of the purchase.  You can check the same by logging into your DEMAT account.

How to Sell

Just like you are buying gold ETF, you can sell the same at your trading account at the existing price or your bidding price and the same units will get deducted from your demat account, once you have sold the requisite number of shares or gold ETF units.

When to buy

Likewise you can go ahead and start buying the best form gold available in India, if you are looking for the investment purpose, i.e. the gold ETF just like you are making an online shopping or online share purchase regularly.  Buying gold regularly whenever there is a dip in price is the ideal way to go about it.  But again, the general thumb rule is that your overall portfolio should not have more than 10% of gold as investment.

If you are looking to invest in gold without worrying about demat account or online trading account then investing via the Reliance Gold Fund and/or Kotak Gold Fund or Quantum Gold Savings would be ideal for you.  If you still have any more doubts about investing GoldETF, etc, just shoot a comment below.

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Objective

The objective of this scheme would be to invest up to 65% in equities and its related instruments while the balance up to 35% in gold ETF schemes available in India.  Thereby giving an added advantage of giving gold as a hedge against inflation even if the equities were not doing so well.

Asset Allocation

From 65% to 8% in equities and related instruments.  15% to 35% in gold ETFs.  0 to 20% in fixed and money market instruments.  The portfolio of this scheme will be rebalanced according to the valuation levels prevailing between the 3 investment opportunities available with this fund.

Options Available

Growth and dividend options (both payout and reinvestment)

Minimum Investment

The minimum investment amount to invest in this fund is Rs. 5000 and in multiples of Rs. 1 thereafter.  The minimum installment amount via SIP would be Rs. 250 per month.  No entry load applicable for this fund while there is a 1% exit load if redeemed or switched within 1 year of allotment of units.

There are very similar funds that have come up in the market like the Canara Robeco Indigo Fund.  This fund’s methodology can be ideal for those looking for an alternative portfolio with equities and gold investment via one fund.  But also remember that there will be additional charges involved due to the FOF mode of investment via the Gold ETF option of its 35% of investment portfolio.

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This is an open ended Fund of Fund which is going to be invested only on the Quantum Gold Fund Exchange Traded Fund which in fact is one of the early starters when it comes to gold ETF funds in India.  By the way the Quantum Gold Fund ETF’s each unit has the value of half gram as against the 1 gram being followed by other MFs.  You don’t need to have a DEMAT account to invest in this gold fund as you can invest in it in lumpsum or via SIP route just like any other regular Mutual Funds.  The Systematic Investment Plan (SIP) is available only when the scheme reopens though.

NFO

The current NFO is open from April 28, 2011 and closes on May 12, 2011 and the same will be reopened on May 26, 2011.

Details

As said above, Quantum Gold Savings Fund is an opened ended Fund of Fund Scheme investing mainly only at the Quantum Gold ETF fund.

Objective

The key objective of this fund is to derive capital gain by way of investing solely in Quantum Gold Exchange Traded Fund (ETF).  The benchmark of this fund is going to be domestic gold price.

Entry and Exit Load: There is not entry load for this fund but there will be a 1.5% exit load if there is redemption or switching within 1 year of allotment of the fund’s units.

Asset Allocation

Up to 95% in Quantum Gold Fund and the balance 0-5% in money market and debt instruments offered by government companies.

Minimum Investment

The minimum amount that you can invest in this Quantum Gold Savings Fund is Rs. 500 and in multiples of Rs. 1 thereafter.  There is only going to be growth option with this fund and no dividend option is available.

SIP

The main advantage of investing in such gold funds is the beauty of being able to invest in gold via the SIP option which is otherwise not possible in regular Gold ETF conventionally, but you can buy them every month at least 1 g of gold via your demat account though.   Quantum Gold Savings Fund has five types or frequencies of SIP namely daily, weekly, fortnight, monthly and quarterly SIPs.  The minimum amount of investment for daily SIP is Rs. 100 while for the others the minimum amount to invest is Rs. 500 and in multiples of Rs. 1.  You can also opt for the Systematic Transfer Plan (STP) or the Systematic Withdrawal Plan (SWP) with this gold fund.

This Quantum Gold Savings Fund (QGSF) is an excellent opportunity for those who don’t have a DEMAT account to buy the regular gold ETFs but have always been wanted to invest in gold on a monthly basis!  Although they have mentioned an annual recurring expense of 0.5% there have been reports that there is not going to be any management fee that is going to be charged for this fund except for the charges being incurred on Quantum Gold ETF.  Hence it could prove to be an additional benefit when you compare it with the Reliance Gold Savings Fund where you get double charges on your investments.  But according to the Quantum Gold Fund’s prospectus there will not be any annual recurring expenses taken from the investors but it will be borne by the AMC and also they will not charge any investment management fee for this particular fund and hence making it an ideal choice for those looking for SIP route to invest in gold.

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Just like any other gold ETF plans, you would need to furnish or have a demat account to buy and sell these Gold ETF units, where each unit represents a gram of gold.  These units will be listed in both NSE and BSE exchanges when it reopens for public.  Since it being a passively managed fund, it just follows the price of gold in the Indian market and the NAV of the fund directly is impacted by the gold price minus any fund charges and expenses.

Objective: The main objective of Birla Sunlife Gold ETF is to generate revenue akin to that of the gold performance devoid of tracking errors.

Asset Allocation: Up to 95 to 100% will be invested in the physical gold and 0 to 5% in money market and debt instruments.

Plans and Options: Since being an ETF, Birla Sun Life Gold ETF does not come up with either the growth or dividend options as the brought unit will be listed on NSE or BSE and in demat form.  There is no entry or exit load for this fund but there is a recurring 1.5% p.a. expenses for this fund which will be adjusted to the NAV.

Minimum Investment: The minimum amount that you can invest in this fund during NFO is Rs. 6000 and in multiples of Rs. 2000 thereafter.

Benchmark: The domestic physical gold price.

Since being just another gold ETF fund, there is nothing to cheer about this New Gold ETF fund from Birla Sun Life but if you have not started yet on the gold ETF investment yet, you can try this option since the initial investment will be via the physical application while the subsequent purchases can be made at the online trading account when it gets listed at the stock market.  Otherwise this is just another Gold Exchange Traded Fund from another Fund House and also there is nothing new to talk about as well.  You can also try the well established ETFs like the Goldbees if you want to go for the existing funds.

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