Thursday, April 21, 2011

INVEST IN GOLD THE BEST WAY.....

While there are many ways to invest in Gold, the Mutual Fund route is the best due to transparency, low cost, liquidity, tax benefits and more.

The Ever rising Gold and Silver prices has triggered a rush to invest in these commodities and let us see which is the best way to make maximum returns through the mutual fund route.
Before that, it would be worthwhile to note what experts have to say on the future Gold outlook.

While everyone knows about the Gold ETFs like Reliance Gold Fund, Gold Bees, etc.(Gold ETFs are funds which track the value of Gold by investing in Physical Gold),  not many investors seem to be aware the difference that two Gold Funds have.
These two funds, namely AIG World Gold Fund and DSPBR World Gold Fund are actually Fund of Funds which invest in Gold Mining Companies Worldwide








The DSPBR World Gold Fund invests in the units of Black Rock world gold Fund whereas AIG World Gold fund invests in Falcon Gold Equity  Fund.
The point to be noted here is, that Gold Experts are unanimous in their opinion that the mines in South Africa are saturated and over a period of two-five years, may lose their dominance due to high cost of production.
This point makes it clear that for a LONG term investor, AIG World Gold Fund may give better returns than DSPML World Gold Fund.
Note, the Falcon Gold Equity Fund has been awarded THE BEST FUND for the THIRD Consecutive year at the Lipper Fund Awards 2011.
Another very good way to get a Gold Exposure is through Reliance Gold Savings Fund.
For more details on this you can click here………
http://goodfundsadvisor.blogspot.com/2011/02/reliance-gold-savings-fund.html

The price correlation between the Gold prices and the NAVs of the AIG/DSP World Gold Fund is not direct and tend to vary.
This is because these Funds invests in Equities of Gold Mining Funds and tend to have a time lag between the Gold price variation and Stock price variation.
These stocks normally rise than Gold price rise and fall steeper than Gold price fall.
But, regarding their Gold Fund, the performance is linked to Falcon Gold Equity Fund which in turn invests in equities of Gold Mining companies.








The difference between the DSP Black Rock World Gold Fund and the AIG World Gold Fund is this.
AIG World Gold Fund typically invests in Gold Mining Companies based in Canada and prefers mid caps.
DSP World Gold Fund typically invests in Gold Mining Companies based in South Africa and prefers Large Caps.


So, obviously, a SIP investor would make more money in AIG World Gold Fund as its NAV is more volatile.
Finally, to sum up,
My vote for the BEST way to make gains through Gold investing is through a SIP investment in Reliance Gold Savings Fund.
Best of luck,
Srikanth Matrubai

10 comments:

  1. If one has a demat account then going for a GOLD ETF makes much more sense than a GOLD savings fund.

    ReplyDelete
  2. If one has a demat account then going for a GOLD ETF makes much more sense than a GOLD savings fund.

    -Saket

    ReplyDelete
  3. If one has a demat, I still feel buying Gold ETF makes much more sense than a GOLD Fund.

    -Saket

    ReplyDelete
  4. I beg to differ Saket.
    In gold ETF over a period of time, due to their expense charges, you will be losing your money, however in Gold Fund, due to SIP averaging, you will be making more returns due to rupee cost averaging inspite of charges here too.
    Go for a SIP in gold fund

    ReplyDelete
  5. If you can afford you can always do an SIP in ETF. Gold funds inturn invests in Gold ETF so expenses should matter more for Gold funds. What can be a concern is the brokerage, but that is also quite less these days.

    -Saket

    ReplyDelete
  6. Most importantly, SIP investment gives the Rupee Averaging Advantage which is available in these Gold Savings Fund whereas ETF does not allow the same

    ReplyDelete
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  8. Really interesting and informative article and i appreciate your work. Thanks for sharing and now i am going to follow you,..

    ReplyDelete
  9. There are very few opportunities to invest in Silver through mutual funds.

    ReplyDelete
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