Tuesday, August 30, 2011


SBI has come with SBI Gold Fund.
You can invest if you are under exposed to Gold.

SBI has launched SBI Gold Fund – its FoF that feeds into its gold ETF.
The SBI Gold Fund is very similar to Reliance Gold Savings Fund and hence
the working of the fund is known to most of you, my clients.
If you have not yet understood its working…please read…

This fund will be investing in the gold exchange traded fund (ETF) as an
underlying. So this method is very convenient to those investors who are
not very comfortable with buying the gold ETF through the stock
SBI Gold  fund will enjoy the same tax benefits as any exchange traded gold
There will no limits on investment.

Gold has been a star performer for the past 4 years.
Being seen as a safe haven across universe, Gold has been chased by all
types of investors. The recent Economic upheavel across the World has
pushed up the Gold prices and there is no reason why Gold should not do
Gold, as we know, has been a star performer for the past couple of years.
Gold is a counter cyclical in nature and hence an ideal asset tool in
Gold should be looked at as a diversification, as a hedge in your portfolio.
Even if everything else goes wrong, this is one asset that would do well,
particularly in times of uncertainty. So it should be looked at from an asset
allocation or diversification point of view, rather than taking a view on the
price where it is trading today.

Why invest in SBI Gold Fund??

There are 6 reasons for you to invest in a Gold Saving Fund and SBI Gold
Fund in particular…
In Gold ETF space, SBI Gold has been a outperformer because the Fund has
been fully invested and has minimal tracking error.
2. The SIP option gives you the advantage of buying Gold in as small
quantity of Rs.100/- which is not possible with a Gold ETF.
3. Yes, being a Fof, there is no Compulsion of Demat Account.
4. Excellent way to accumulate Gold without being concerned about the
Secuirty, Purity, making charges, etc.
5. Taxation laws enable you to take the benefit of Long Term Capital Gains
after just period of one year of its holding which is not so in case of Physical
6. The Biggest plus point for the Gold Saving Fund according to me, going
forward, Gold is going to be more and more volatile, hence will benefit SIP
investors immensely.
SIP in SBI Gold Fund NFO is likely to generate higher Returns than GOLD
ETF, with the assumption that Gold Prices may continue to be VOLATILE by
5-10% . Investor will be invest in this Fund during Declines in Gold
Prices(via SIP of course). This is likely to Reduce the Cost of Purchase of GOLD UNITS in Fund
of Funds.

Gold recent sharp rise will see it going periodic price correction which will
help SIP investors average their cost.
For someone, who has no exposure to Gold at all, this Fund is an excellent
way to get an exposure and set his Asset Allocation right.
If you are investing through Sips, YES go for SBI Gold Fund…otherwise it is a
Strong NO!!!
Best of luck,
Srikanth Matrubai

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  1. Why investing in Gold FoF is better if we can invest in gold ETF through SIP?

    Lets say if I buy 1 gm in SBI ETF through SIP every month, I will still get the cost averaging benefit. So what should be the reason for paying extra 0.5% annual recurring charges for SBI Gold fund?

  2. Dear Rohan,
    Good point,
    But do not forget the Brokerage charges which you pay every time you buy ETF.....

  3. Srikanth Sir,

    but brokerage charges will be paid only at the time of buying/selling, but annual recurring charges will be paid every year.

    Technically speaking, by paying 0.5% more, the difference will be significant over the years.

  4. Yes, agreed, but if you are buying every month and paying brokerage every month, then obviously the brokerage/transaction charges will be very very high than the Annual Demat Charges.

  5. good forum, can anybody advise a suitable site that offers gold and silver investment tips. I have found nice informative site called http://www.marketonmobile.com but they dont offer tips.


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