Asset Allocation: There are two plans available with this fund namely plan A and plan B.  In Plan A you can get to choose to invest in 80-100% in debt and money market instruments and the rest in equities.  In Plan B your money will be invested in debt, gold as well as equities.  The gold will be in the form of investing in Gold ETF.

NFO Details: At the time of NFO the unit price of the Morgan Stanley Multi Asset Fund will be Rs. 10 per unit and the minimum investment amount is Rs. 5000.  The NFO closes on January 31, 2012.

Options Available: Growth and dividend payout and reinvestment options.

Such hybrid funds are a good choice for those who are looking to diversify their investment with one single investment option but since being an NFO, think twice before investing in it.  Otherwise you can also choose other such 3 mixed class funds which other MFs like the Sundaram Equity Plus.

It is primarily a debt fund which has its leg on both equities and gold class.

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As many are having the wrong notion that mutual funds only invests in equities which was not the case as we are going to find out that Mutual Funds in India apart from investing in equities also invests in other avenues like bonds, debt, gold and other options.  There are around 16 types of mutual funds available in India offered by various AMCs.  You can find the same below:

Types of Mutual Funds

• Thematic equity funds
• Diversified equity funds
• Small & mid cap funds
• Equity link savings schemes (ELSS)
• Large cap equity funds
• Exchange traded funds
• Index funds
• Balanced funds
• Monthly income plans
• Long term income funds
• Fixed maturity plans
• Gilt funds
• Short term income funds
• Capital protection funds
• Ultra short term debt funds
• Liquid funds

Now we will look into each of the above mentioned type of funds in brief on what they are and how they invest.

Thematic Equity Funds

The Thematic Funds as the name suggests invests primarily only in a selected theme of companies in equity market, for example infrastructure mutual fund invests only in infrastructure related companies and similarly there are other thematic funds like banking funds, FMCG funds, pharma funds, etc. These funds are high risk and high return funds.

Diversified Equity Funds

These type of mutual funds invests across the board and companies in the equity market according to the asset allocation as specified.  It invests primarily in large cap, mid cap and small cap funds.

Small and Mid Cap Funds

These are the funds which invests mostly in the mid and small cap companies and hence it is ideal for the risk averse investors and not recommended for those who are new to MF in general.

Equity link savings schemes (ELSS) Funds

This is the tax saving mutual fund which helps you save on income tax under section 80C and there is a minimum lock in period of 3 years for this fund.  And also this fund will cease effective April 2012 as the new DTC comes into force which have cancelled the tax saving option for such schemes.

Large cap equity funds

As the name suggests this type of fund invests only the top of the crop or top 100 funds or follows either the SENSEX or NIFTY index and invests in the companies which have huge market capitalization for example like Infosys, TCS, SBI, etc.  Hence it is one of the better mutual fund type when it comes to equities fund.

Exchange traded funds (ETF)

These are the funds which can be brought and sold only via the stock exchange just as the name suggests.  For example we have the gold exchange traded funds, which invests in bullion in India, also there are other ETFs like NIFTY ETF, Bank ETF, Junior NIFTY, etc.  These Exchange traded funds only invests in their respective index funds or gold.

Index funds

These types of funds follow certain index and replicates the same when it comes to investment and hence the returns also will be almost similar to what that index offers.  For example there are index funds which follows either BSE SENSEX or S&P CNX Nifty and invests on those companies that falls in this index and the percentage of investment also will be replicated exactly according to the index that it follows.

Balanced funds

Such type of fund primarily invests a certain percentage of their portfolio in both equities as well as in debt, mostly it will be 50/50 but it may vary according to the specific fund’s allocation.  This is also ideal for those looking to enter the equities market via mutual funds as the risk involved in this fund is minimal compared to the large, mid and thematic funds.

Monthly income plans (MIP)

These monthly income plans are just like the post office offered MIPs but the only difference is that these mutual fund offered MIPs don’t actually guarantee you monthly returns as the name suggests but only offer you returns at a regular time.  These types of funds mostly invest in debt market but a certain percentage also in equities for better returns.

Fixed Maturity Plans (FMPs)

The Fixed Maturity Plans or FMPs as they are popularly known as are the closed ended funds which invests only in the secured bonds, debt and money market instruments over a period of time and gives you a return that follows these instruments.  This is the most widely brought funds right next to the regular equity funds offered by various mutual fund companies.

Capital protection funds

These are the latest armor that these MF companies have come up with which works just like the MIPs but the only difference being that it is closed ended and helps you on capital gains via investing in debt market while investing a certain portion (around mostly 30%) in equities for better returns and while the balance 70% of debt market investments helps protect your capital.  Although they don’t guarantee any fixed returns.

Long term income funds, Gilt funds, short term funds, ultra short term debt funds only invests in the more safer instruments like debt, government bonds, money market instruments and hence the returns too follows them.  The risk involved in such funds are very minimal.

Liquid Funds

These liquid funds are just like bank savings account which are best suited for the HNIs and others who want to invest for short term but yet get a better returns than what banks offer in the savings bank accounts.  Such funds have prompted mutual funds to even offer Mutual Fund  ATM Card.

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In what could be termed as the first of its kind ever in India, Reliance Mutual Funds has launched the first ever ATM Card linked to your mutual fund that you have with them.  This card is brought in association with the HDFC Bank  With this ATM card you can all that you do with a regular ATM or Debit Card like you can withdraw cash from the ATMs, use it to make shopping as well as make further investments in the various mutual funds schemes with Reliance.

Features of Reliance ATM Card

• You can access any VISA ATM across India
• Accepted as a debit card across various merchant establishments
• Immense opportunity to earn growth unlike your regular savings account
• You can start investment across various schemes via Visa ATMs

In order to use your Reliance ATM Card you will need invest in either the Reliance Money Manager Fund or the Reliance Liquid Fund which acts just like a regular savings bank account and helps you spend or invest from it whichever way you want to use your money.

This is a new step that mutual funds are taking in India and as is expected it is the Reliance that has brought out for the benefit of the investors.  This is an excellent move by them and can prove to be beneficial who wants to park a lump sum amount in a regular liquid fund or any money manager fund with which you can transact for spends or even invest at any of the equity funds, gold funds or even the debt funds directly.

Now with the increase in interest rate for Bank Accounts this move can be even beneficial for those whose bank has not yet increased the savings account interest rates.

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Investment Objective:  Of the Religare Gold Fund is to help you get capital gains by primarily investing in Religare gold ETF fund.

Asset Allocation:  The asset allocation is up to 95% in gold and balance 5% in debt and money market instruments.  The benchmark for this Religare Gold Fund being the price of gold in India.

Loads:  No entry load applicable for this fund just like any other new or existing funds, but you may need to incur Rs. 100 to Rs. 150 if you are new to investing in Religare Mutual Funds and are investing via your investment advisor.  There will be an exit load of 1% if you exit within 1 year of investment.

Advantages

• Invest in gold via SIP
• Easy liquidity
• Less charges compared with gold jewelry and coins
• No worry about gold theft
• Hedge against inflation
• Power of compounding works with SIP
• No need of demat account to invest in paper gold

After the NFO you can continue to buy the units of this Religare Gold Fund at the existing NAV.  But remember if you invest in this gold fund you will need to shell out double charges including that of the Religare Gold ETF.  If you already have a demat account then buying ETFs directly is more profitable than buying via such gold funds.

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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: The NFO of this HDFC Gold Fund is open from October 7, 2011 and closes on October 21, 2011.  The price during NFO would be Rs. 10 per unit and after reopening it will be according to the existing NAV.

Options Available: This gold fund from HDFC has only the growth option available and there is no dividend option applicable at the moment.

Objective:

The primary investment objective of this FOF scheme is to seek appreciation of your capital by investing in the HDFC Gold ETF Fund and hence closely following the gold rate in India and giving you almost nearly the returns of a gold investment.

Entry and Exit Loads:

There is no entry load applicable for this fund as well but there is an exit load of 2% if you redeem or withdraw within 6 months of investment or it is 1% if you withdraw, redeem within 1 year of your investment.

Minimum Investment:

The minimum amount that you can invest in this HDFC Gold Fund is Rs. 5000 and for additional purchase on an ongoing basis you can add more in multiples of Rs. 1000.

Asset Allocation:

95-100% in HDFC gold exchange traded fund and balance 0-5% in money market and debt securities.

SIP Option:

The minimum amount that you can invest via SIP in this gold fund is Rs. 500 and in multiples of Rs. 100 for the monthly option and while for the quartery option the minimum amount is Rs. 1500 and more in multiples of Rs. 100.  Investing through Systematic Investment Plan (SIP) is the best advantage of going for such gold funds no matter which MF company that you choose.

Advantages of HDFC Gold Fund

• Investing in gold via SIP on a monthly basis
• No need of demat account which in fact is mandatory for gold ETF
• Also you can opt for the STP or even SWAP just like a regular mutual fund
• This fund offers great liquidity option compared with the physical gold or any other form of gold
• Long term capital gain after 1 year of investments
• Purity of gold guaranteed
• Advantages over gold jewellery, coins, etc

Disadvantage:

The main disadvantage being that you will need to shell out double service charges in you invest via this fund, i.e. the charges incurred on its parent fund namely the HDFC Gold ETF as well as the service charges that is applicable on this fund and hence a total of up to 2.5% which will be less of around 1-1% if you directly invest in the ETF gold funds.

Such gold funds, including the HDFC Gold Fund are ideal for those who are looking for investing in gold on a monthly basis, a given fixed sum every month.  And also ideal for those who don’t have a demat account to buy the HDFC Gold ETFs or any other ETFs online.  To apply for this HDFC Gold Fund just contact HDFC Mutual Funds at their toll free number 1800 233 6767.

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Scheme Objective: Of IIFL Nifty ETF is to generate returns that is closely corresponding to the total returns from the S&P CNX Nifty Index less any tracking errors.

Asset Allocation: 95% to 100% in Nifty Index 0-5% in money market and debt instruments.

Entry and Exit Load: No entry/exit load.

Minimum Investment: The minimum investment in IIFL Nifty ETF is Rs. 5000 and in multiples of Rs. 1 and above.

IIFL Nifty ETF is going to track the Nifty Index fully and hence primarily invests in large cap funds listed in Nifty index.

Low Fees

The Nifty ETF from IIFL comes with the lowest fee of 0.25% p.a. including all the fees.  That means the fees for one year for Rs. 100 invested is just 25 paisa.

Demat Account

After the NFO you can buy the units as low as 1 unit via your online stock trading platforms just like you buy and sell stocks of various companies.  To buy and sell these ETFs you would need to have trading account and a demat account and without it, it is not possible to buy them.

If you are looking for the cheapest way to invest in equity funds try such index based ETFs which may closely track the index that it follows and hence gives you almost the same returns and with the least possible fees ever.

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