Gold ETF beats it all …Again(October Review)

A Review of performance of GOLD ETF based on earlier post Gold ETF beats it all

Gold Exchange Traded funds have performed exceptionally well since their inception in India. One of the primary reasons attributed to it could be inherent bias of Indians towards gold as a precious metal. However, recently Gold is receiving a fair share for investment purposes as well. In times of economic and financial turmoil it is a safe heaven for many.

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Gold EFT’s which are primarily traded on NSE (see codes) have outperformed many local and International equity indices(BSE, NIFTY, Dow Jones, Nikkei, Hang Seng).
At a time when equities valuations around the world were getting beaten down Gold ETF has provided investors promising returns of more than 15%. Comparing this returns to double digit negative returns of equity indices, surely makes a case for many investors to diversify their existing portfolios and include any of the available Gold ETF’s (BeEs, Kotak, Quantum, Reliance, and UTI)

Listed below is a comparison of returns of Gold ETF with various indices around the world. The NAV for 29-Oct-2008 is considered for comparison. Some data is proportionately adjusted for comparative study.

Scheme Name 1 mth % 3 mths % 6 mths % 1 yr % 3 yrs % NAV Category Structure
UTI Gold ETF (10.52) (8.45) 1.19 16.39 NA 1164.88 ETF Open Ended
Gold BeES (10.51) (8.46) 1.18 16.32 NA 1162.31 ETF Open Ended
Kotak Gold ETF (10.52) (8.44) 1.15 16.29 NA 1165.41 ETF Open Ended
Quantum Gold Fund – Growth (10.51) (8.35) 1.31 NA NA 580.25 ETF Open Ended
Reliance Gold ETF – Dividend (11.07) (9.48) (0.01) NA NA 1136.79 ETF Open Ended
Average performance of similar category funds (10.63) (8.64) 0.96 16.33 NA 1041.93
S&P Nifty (32.64) (38.03) (47.25) (52.63) 5.04
BSE Sensex (31.25) (37.22) (47.06) (52.90) 5.43
Nasdaq (7.32) (5.95) 0.78 (12.73) 1.18
FTSE (2.13) (6.46) (6.23) (14.07) 0.26
Dow Jones (1.89) (5.93) (5.68) (14.03) 2.25
Strait Times (8.74) (14.88) (11.90) (26.62) 3.40
KLSE (6.68) (14.81) (15.30) (18.77) 4.34
HangSeng (8.80) (12.73) (11.21) (8.07) 12.00
Kospi (8.36) (17.24) (12.81) (16.68) 11.10
MSCI World Index 7.41 2.33 8.16 18.73 16.22
Nikkei (6.06) (6.66) (7.57) (21.20) 0.90
*Note:- Returns calculated for less than 1 year are Absolute returns and returns calculated for more than 1 year are compounded annualized.

Golden Quotes:

James Grant : “Nothing beats a little cash in a bear market and the oldest form of cash is gold.”

Karl Marx : “Although gold and silver are not by nature money, money is by nature gold and silver.”

At the end of the day, bullion is more important than the billion.

Related Posts Only (manually created not automatically generated, thankfully)

How to buy Gold ETF?

How to buy Gold ETF?

Listed below is a simple way to own a Gold ETF.

Gold EFT are fast becoming a rage in India. One reason attributed to its popularity could be its stellar performance in a relatively subdued market conditions.

When first introduced in India, many were skeptical about its relevance and suitability in Indian markets, however increasing volumes and new scheme launches(Quantum, SBI) indicate its growing acceptance in a naive market like India. It is a complex financial instrument. (read EFT F.A.Q).It involves many different entities apart from usual fund managers who manage the scheme. However, its has its own limitations since it is listed on exchanges.

Many people are unaware of ways to buy a GOLD ETF.

You need a Demat account along with broker who is a member of NSE to buy a Gold ETF.

Some of the popular brokerage firms like ICICI Direct, HDFC Securities, KOTAK Securities.

Along with traditional brokerage firms like India Infoline, Geojit, IndiaBulls, Sharekhan also offer a demat account with brokerage facilities.

Once you have a brokerage account you can buy Gold ETF by placing an order like a normal stock order to buy listed Gold ETF. Most of the ETF are listed only on NSE. Unfortunately, BSE does not have any Gold ETF listed on it.

Additionally codes like be required to be inputted to buy it online or through telephone, as many brokerage firm’s customer care executives are unaware of the codes.

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Benchmark Mutual Fund – Gold Benchmark Exchange Traded Scheme (NSE Symbol: GOLDBEES)

See today’s price Nav of Kotak Mutual Fund – Gold Exchange Traded Fund (NSE Symbol: KOTAKGOLD)(See price chart)

See today’s price Nav of UTI Mutual Fund – UTI Gold Exchange Traded Fund (NSE Symbol: GOLDSHARE)

See today’s price Nav of Reliance Mutual Fund – Gold Exchange Traded Fund (NSE Symbol: RELGOLD)(See price chart)

Quantum Gold Fund – Exchange Traded Fund (ETF) (NSE Symbol: QGOLDHALF)

Interesingly, Quantum Gold is also available for 0.5 grams(1/2 gram) of gold. Now that’s truly a product for the masses since the pricing is half of other available Gold ETF.

Apart from Gold ETF, some other mutual funds are also available which invest in different gold mining companies and international gold funds as well.

Funds like DSP ML World Gold and AIG Gold Fund have also fared better than indicative markets indices.

Since these funds(DSP World Gold, AIG Gold) are not ETF’s, no demat account is required and can be purchased like any other mutual fund schemes.

Update: January, 07, 2009.
Now Kotak Securites has launched a facility where investors can invest in Gold ETF on a regular basis.
These facility in similar to SIP in GOLD ETF, or GOLD ETF SIP.
Kindly comment in case any other brokerage has similar facility.

DSP World Gold Fund-Returns Analysis

DSP Merrill Lynch World Gold Fund

An open-ended fund of funds scheme, investing in gold mining companies through an international fund, with the primary objective of seeking capital appreciation by investing predominantly in units of Merrill Lynch International Investment Funds – World Gold Fund (MLIIF –WGF). The Scheme may, at the discretion of the Investment Manager, also invest in the units of other similar overseas mutual fund schemes, which may constitute a significant part of its corpus.

Returns as on 15-Jul-2008

Period For Period less than 1 Year – Absolute Return
World Gold Fund FTSE Gold Mines (CAP) Index
Since Inception 51.49 % 36.42 %

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Past performance may or may not be sustained in the future and should not be used as a basis for comparison with other investments.

The FTSE Gold Mines (CAP) Index is the adopted benchmark of the scheme. The value of the index as on 15-Jul-2008 was as follows:

FTSE Gold Mines (CAP) Index : 142185.2

The NAV as on 15-Jul-2008 was Rs 15.1490

‘NA’ indicates Non-availability of Data for the specific period.

Note: As per the SEBI standards for performance reporting, the “since inception” returns are calculated on Rs. 10/- invested at inception. For this purpose the inception date is deemed to be the date of allotment, i.e. 14-September-2007.

DSP Merrill Lynch World Gold Fund

DSP Merrill Lynch World Gold Fund

An open-ended fund of funds scheme, investing in gold mining companies through an international fund, with the primary objective of seeking capital appreciation by investing predominantly in units of Merrill Lynch International Investment Funds – World Gold Fund (MLIIF –WGF). The Scheme may, at the discretion of the Investment Manager, also invest in the units of other similar overseas mutual fund schemes, which may constitute a significant part of its corpus.

Plans Minimum Investment
• Regular • Regular – Rs 5000
• SIP – Rs 1000 (min 12 installments)
Options Minimum Additional Purchase
• Growth
• Dividend – Payout
Reinvest
• Regular – Rs. 1000
Entry Load Exit Load
Plan % Load Investment Plan % Load Holding Period
Regular 2.25% < Rs. 5 crores Regular* 1% < 6 months
Nil Rs. 5 crores 0.5% 6 months < 12 months
Nil 12 months
SIP 1% SIP 1.25% < 2 years
Nil 2 years
*No entry load on direct applications i.e. applications not routed through an agent/distributor, with effect from January 4, 2008.
*Exit load is not applicable in the case of switch out into DSP Merrill Lynch World Gold Fund and any open ended equity oriented scheme/plan of the Fund (other than DSP Merrill Lynch Balanced Fund)

Indicative Asset Allocation

Under normal circumstances, it is anticipated that the asset allocation shall be as follows:

Instrument Indicative Allocation (% of Corpus) Risk Profile
Units of MLIIF-WGF or other similar overseas mutual fund scheme(s) 90% – 100% High
Money market securities and/or units of money market/liquid schemes of DSP Merrill Lynch Mutual Fund 0% – 10% Low to Medium

Investor Benefits & General Services:

STP, SWP, Nomination & Direct Deposit Application facilities available, subject to applicable conditions as per the Offer Document Redemption proceeds issued normally within 5 Business Days Declaration of NAV on all Business Days Sale and Redemption of units on all Business Days at Purchase Price and Redemption Price respectively Cut Off Time for Subscription, Redemption and Switching : 3.00 p.m.

AS ON 30th JUNE 2008
Top 10 Sectors Top 10 Stocks
Industry % to Net Assets Name of Instrument % to Net Assets
Gold 76.70% Newcrest Mining 7.90%
Platinum 11.30% Barrick Gold 6.90%
Silver/ Gold 8.90% Kinross Gold 6.60%
Cash 2.30% Impala 5.50%
Diamonds 0.80% Minas Buenaventura 5.40%
INDS Penoles 4.10%
Goldcorp 5.40%
Lihir Gold 4.60%
Agnico Eagle Mines 4.00%
Newmont Mining 4.00%

Related Posts

DSP Merrill Lynch Natural Resources Fund

DSP Merill Lynch Launches World Gold Fund

Kotak Gold ETF Price movement chart.

Kotak Gold ETF Price movement chart.
Below is the price movement chart for Kotak Gold ETF since 01-Jan-2008 till 28-May-2008. A trendline is also added to the chart for better understanding purpose.
The prices are the applicable NAV for corresponding period or dates.

Kotak Gold ETF Price movement chart

Kotak Gold ETF Price movement chart

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Reliance Gold ETF Price movement chart

Reliance Gold ETF Price movement chart.

Below is the price movement chart for Reliance Gold ETF since 01-Dec 2007 till 29-April-2008.

Price movement chart for Reliance Gold ETF

Price movement chart for Reliance Gold ETF

A trendline is also added to the chart for better understanding purpose.

The prices are the applicable NAV for corresponding period or dates.

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gOLD eTF

James Grant puts it, “Nothing beats a little cash in a bear market and the oldest form of cash is gold.”

When markets are erratic and times are unpredictable, the wise thing to do is to step up exposure to an asset that would infuse a semblance of stability and strength in the portfolio.

The simplest and best way to do this is to invest in a gold exchange traded fund(ETF).

ETFs are essentially index funds listed on the exchange. You can buy and sell them just like you would buy and sell a share. In a gold ETF, the underlying asset is standard gold bullion (99.5% purity).

In other words, a gold ETF is just like any other mutual fund scheme – the only difference being, instead of being invested in equity shares, the monies collected are invested in gold.

Generally, the price of one unit represents approximately one gram of gold. And since these are passively managed funds, the NAV will basically track the price of gold in the open market.

Currently there are three gold ETFs listed in the market —- Gold BeES, Kotak Gold ETF and UTI Gold ETF. Reliance MF has an ongoing NFO, post which, the units would be listed to begin with on the NSE.

Now, in a country where gold worth over Rs 70,000 crore per annum is sold in the form of jewellery, coins, biscuits and bars, the total assets under management (AUM) of these schemes amount to just around Rs 325 crore.

This clearly suggests that investors are either unaware or uncomfortable with buying gold in the electronic form.

A change of mindset is needed and it shouldn’t really be that difficult, given that we already own other equally valuable assets in a similar form.

Think of the money in your bank. Whether you have Rs 10,000 or Rs 10 lakh or over a crore, the physical cash is not lying in your safe — your bank passbook indicates the amount you own.

Similarly, there was a time, not too long ago, when physical share certificates needed to be delivered and stored. Then we shifted to electronic holding and an investor’s life was never more convenient.

Similarly, gold can also be held in the dematerialised, electronic form, which is a safer and more efficient way of owning it.

For starters, there is no doubt on the purity — you can’t get purer gold even if you tried and you don’t even have to depend upon human honesty or scruples. With a gold ETF, impurity risk is non-existent.

Security is, of course, taken care of by the fund, unlike in the case of jewellery or other forms of physical gold, where the threat of theft always looms large.

Coming to denomination, one can literally buy one gram at a time.

Though a traditional SIP, as we understand it, is not possible in the case of gold ETFs, one of my friends has been diligently picking up 10 grams of gold per month from mid-March onwards (when the first ETF was made available) and by now, he is already the proud owner of 70 grams of the highest quality gold.

When it comes to selling back, the making charges of jewellery cannot be recovered. In fact, it is generally bought back at a discounted price. Coins and bars also suffer from similar problems.

Units of gold ETFs, on the other hand, can be sold by either a call to your broker or with a few clicks of your mouse, if you have an online trading account.

The tax benefits round off the manifold advantages of holding gold in the electronic form — it is free of wealth tax and subject to long-term capital gains tax of 10% as against 20% in case of physical gold.

To sum it up Gold prices have spurted by almost 12% in the last two months, leading to a corresponding rise in the NAVs of the gold ETFs.

However, investors shouldn’t look at gold on the basis of returns in a particular period.

This investment is essentially a hedge against inflation and its quality of negative correlation with other asset classes like stocks, fixed income securities and commodities during uncertain times.

Like Karl Marx put it, “Although gold and silver are not by nature money, money is by nature gold and silver.” At the end of the day, bullion is more important than the billion