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)

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

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



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

Kotak Global Emerging Market Fund – Closed Ended, Kotak MF, Emerging Market Fund, EMF.

Kotak Mahindra MF launches Global Emerging Market Fund

Kotak Mahindra Mutual Fund (MF) has launched Kotak Global Emerging Market Fund, a three year close-ended equity scheme that aims at investing in emerging economies across the globe. The scheme opens for subscription on Jul. 25, 2007 and closes on Aug. 24, 2007. Units of the scheme will be available at Rs 10 per unit.

The scheme aims at providing long-term capital appreciation by investing in overseas mutual fund scheme that invests in a diversified portfolio of securities.

What is Inside?
The scheme offers growth option and dividend option. The dividend option will have payout and re-investment facility.

The minimum application amount is Rs 5,000 and Rs 1.00 thereafter.

As it is a close-ended scheme there is no entry load. Further the scheme does not levy any exit load .

Asset Allocation
The scheme aims at investing 90 – 100% in the units of T. Rowe Price Global Emerging Markets Equity Fund – SICAV (TGEMF) and 0 – 10% in money market instruments and debt funds.

Investment Strategy
The scheme will invest in overseas mutual funds and collective investment scheme(s) investing in various instruments in the global emerging markets. Kotak Mutual Fund has identified Luxembourg domiciled T. Rowe Price Global Emerging Markets Equity Fund – SICAV (TGEMF) as the portfolio for the purpose. The Global Emerging Markets Equity Fund invests in equity and equity related securities of companies established in or conducting a significant proportion of their business activities in the economically emerging countries of Latin America, Asia, Europe, Africa and the Middle East.

Performance and Management
The performance of the scheme will be measured against MSCI Emerging Market Index and the fund manager is Nishat Doshi, who will manage overseas investment, and Ritesh Jain will be the fund manager for debt instruments.

From the Fund house:
On launching Global Emerging Market Fund, Sandesh Kirkire, Chief Executive Officer, Kotak Mahindra AMC said, Kotak Global Emerging Market Fund provides the investor a smarter way to invest in emerging markets around the world. The centers of economic excellence are shifting to emerging markets like India, China, Russia, Taiwan, Mexico and Brazil. Such global funds seek to gain from the benefits offered through global diversification and also by investing in a investing in a single market, both in terms of opportunities for profit and diversification of risk. Also, emerging economies are able to deliver comparable and sometimes even better returns than India.

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