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A new type of investment in Gold is developing in India via Gold savings funds. It is mainly intended for those investors who don't have Demat account. For those sections of the society who can't invest in Gold ETF because of not possessing Demat account, can now invest in Gold ETFs via Gold fund of funds run by Reliance. This Gold Savings funds mainly invest in Gold ETFs run by the parent mutual fund and other instruments like fixed deposit etc... For example, in case of Reliance Gold savings fund, it buy the units of Reliance Gold ETF and Kotak Gold savings fund buy the units of Kotak Gold ETF.
The investor can buy and sell the units of Gold savings fund by walking into the branches of Asset management Company. It is cost effective and convenient way of purchasing Gold in India. It is a open ended fund. When you buy Gold Savings fund from Reliance, they in turn buy the units of Reliance Gold ETF. Thus you are assured of 99.5 % purity of Gold that you are buying.
Another important advantage of this fund is the SIP option. You can invest as minimum as Rs.100. You can increase the amount of SIP later. So considering all these factors Gold Savings funds can become well worthy to consider.
At present, below mutual fund houses are offering Gold Saving Schemes.
· Reliance mutual fund,
· SBI mutual fund and
· Kotak mutual fund,
· HDFC Mutual Fund,
· ICICI Prudential Mutual Fund,
· Birla Mutual Fund.
There is not much to differentiate among them. All funds invest in the Gold ETF run by them.
Advantages of Investing in Gold Savings Funds
1. First and foremost advantage of Gold savings fund is the avoidance of Demat account. All sections of society can buy and sell units of Gold Savings fund. Demat account is not needed.
2. You can buy and sell units of funds in a hassle free manner. No complications.
3. Presence of easy and small SIPs and EMI's is boon for common people who don't have too much disposable income.
4. You can average your price since you can invest every month's price of Gold
5. Taxation benefits of long term capital gain tax after one year.
Disadvantages of Investing in Gold Savings Funds
1. High expense ratio when compared with Gold ETF in India. Normally expense ratio can come to 1.5% to 2.5% when all expenses are calculated.
2. Exit load of 1.25% to 2% if redeemed before one year.
3. Funds present now, only invest in the Gold ETF run by the parent company. It should have been more than one Gold ETF. If the parent Gold ETF produces less returns, then the Gold fund will also give less returns.
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