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.

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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%

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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 MUTUAL FUNDS INDIA NFO(Exchange Traded Fund-ETF)

Slew of ETF(Exchange Traded Funds) for most precious commodity i.e Gold are being launched in the coming few months. BenchMark Funds, UTI, TATA Mutual Fund etc. all these fund houses are planning NFO launches for Gold Mutual Funds.
Primary objective for such funds would be to diversiy the investor’s portfolio, hedging in a relatively safe commodity and a novel instrument for investments in India.

Gold Exchange Traded Mutual Funds would be perhaps first ever to be launched in India.

Gold Mutual Funds are intended to offer investors a means of participating in the gold bullion market without the necessity of taking physical delivery of gold, and to buy and sell that participation through the trading of a security on stock exchanges.

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Gold ETF MF’s are designed to provide returns that, before expenses, closely correspond to the returns provided by physical Gold.

Each unit is approximately equal to the price of 1 gram of Gold.

Advantages of investing in Gold/ Gold MF’s :

GOLD
• An Excellent Diversification for Portfolio.
• Global Asset Class.
• Hedge against Inflation.
• Low Volatility as compared to Equities.
• Store of value.

GOLD ETF MF’s.
• Potentially cheaper to have price exposure to gold price as compared to other available avenues
• Quick and Convenient Dealing through Demat Account
• No Storage & Security Issues for investors
• Transparent Pricing
• Taxation of Mutual Fund
• Listed and traded on stock exchanges, just like a stock-Easy Buying/Selling
• Ideal for Retail Investor as minimum lot size to trade is one unit on secondary market.
NAV of a Unit will track price of approximately 1 Gram of Gold.

Disadvantages of GOLD/ GOLD ETF MF’s:
• Though ETFs are popular abroad, it is still a new concept in India.
• Lack of expertise of Domestic Funds Managers on Gold Spot/Futures and Options prices.

Although India is one of the Largest consumer/importer of this Commodity in the world, there are very few options available for an investor in this amazing commodity purely from an investing perpestive.

This innovative product shall decide the future of other exiting product launches for a huge Gold market.


Overall view : Suscribe

Time Horizon : 3 – 5 years.
Age Group profile: None.

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