Reliance Gold Exchange Traded Fund

Reliance Mutual Fund has launched a Gold Exchange Traded Fund - Reliance Gold Exchange Traded Fund. This open-ended fund will track domestic prices of gold through investments in physical gold. The fund will be initially available for subscription from October 15, 2007 to November 1, 2007.

The fund aims to provide returns that closely correspond to the return provided by the price of gold through investment in physical gold. The performance of the scheme may differ from that of domestic price of gold due to expense and other related factors.

An investor can buy/sell units of RGETF on a continuous basis on the National Stock Exchange and/or other recognised stock exchanges where units are listed and traded like any other publicly traded securities at market prices which may be close to the actual NAV of the scheme.

Around 90-100 per cent of investments would be allocated to physical gold and gold related instruments. Debt and money market component in the portfolio would be upto 10 per cent.

Snapshot
Face value: Rs 100
Type: Open-end, Gold ETF
Options: Dividend
Minimum application amount: Rs. 5000
Entry load: The fund would charge an entry load of 1.50% for investment less than Rs. 1 lakh, 0.75% for investment equal to or greater than Rs.1 lakh but less than Rs. 25 lakhs, 0.50% for investment equal to or greater than Rs.25 lakhs but less than Rs. 50 lakhs and 0.25% for investment equal to or greater than Rs.50 lakh but less than Rs. 1 crore.

Exit Load: Nil
This load is applicable during the NFO period but on the continuous basis the fund would not charge any entry or exit load.

Kotak Gold ETF lists on NSE

The open-ended Kotak Gold ETF got listed on the NSE yesterday (August 9th 2007) (Read Investing in Gold to get a good idea of investing on gold) and opened at the price of Rs 919, which is also day’s high, against its issue price of Rs 892.15. It touched a low of Rs 880 before closing at Rs 892.15. The total quantity traded was 15,257 units, of which 17 per cent was presented for delivery. The Kotak Gold ETF will invest in gold, engage in gold lending, deposit gold with banks in return for fees to the extent permitted by regulators. The asset base of this open-ended Gold ETF is between Rs 40-42 crore.

Please note that this is the third ETF where the underlying asset is gold that is trading at the National Stock Exchnage. The other schemes traded at the national Stock exchange are UTI GOLD EXCHANGE TRADED FUND (NSE Code - GOLDSHARE) and GOLD BENCHMARK EXCHANGE TRADED SCHEME (GNSE Code - OLDBEES).

DSP Merrill unveils Gold Fund

DSP Merrill Lynch Fund Managers announced the launch of DSP Merrill Lynch World Gold Fund, an open ended fund of funds scheme investing in gold mining companies through an international fund.

The primary investment objective is to seek capital appreciation by investing mainly in the units of Merrill Lynch International Investments Fund - World Gold Fund.

This scheme is open-ended, and not an exchange traded fund. The new fund offer will commence on July 25 and close on August 23.

Merrill Lynch International Investments Fund - World Gold Fund is an open ended scheme. Launched in 1994, it currently manages assets of over $5.4 billion (over Rs 21,000 crore).

The scheme is rated AAA by both S&P Fund Research and Forsyth Partners. Over its 12 year track record, the scheme has outperformed its benchmark - FTSE Gold mines (cap) Index over the last one, three and five years and since inception.

The features of the scheme are:
Min Investment Rs 5,000
Entry Load - 2.25% (for regular investments during NFO and continuous offer)
Exit Load - 0.50% for holding period 6 months.

Source: Economic Times

New Fund Offerings of FMP and Gold

Hopefully, you would have read about the benefits of FMP and advantage of investing in gold in the form of ETF.

I just thought that it is best to share some of the offerings that are currently available in the market as of now so that you can take the advanatage of investing in them should these instruments of FMP and Gold ETF interest you.

Kotak Gold ETF
It will take exposure to Gold and endeavour to track the spot prices of Gold. It enables investors to take exposure to Gold market without taking the physical delivery of Gold and enabling liquidity of by listing on NSE.

Dates of NFO - June 20th- July 4th,2007

Unit denomination - 1 unit equivalent to approx 1 gm. of Gold

Listing on NSE and/or BSE

Minimum Investment Amount - INR 5,000/-


Fixed Maturity Plans

1. HDFC FMP 36M June 2007

Dates of NFO - June 4th-July 5th,2007

Tenure - 36 months

Nett Indicative Yield
Retail 9.50% p.a
Wholesale 10.00% p.a

2. ICICI Pru FMP Series 36 - Plan B

Dates of NFO - June 11th - July 10th,2007

Tenure - 18 months

Nett Indicative Yield - 9.90 -10.00 % p.a


3. Birla Fixed Term Plan - Series X

Dates of NFO - June 29th - July 3rd,2007

Tenure - 370 days

Nett Indicative Yield
Retail 9.05% p.a
Institutional 9.45% p.a

So get in touch with your investment advisor or broker or contact the companies directly and you can benefit from these schemes. There is not much time left. I will try and inform you folks much earlier so that you can plan for an investment.

Investing in Gold

Investment in Gold has always been happening in India for various reasons such as diversification, holding gold as an asset class, Hedge against inflation, Low volatility (not really in the recent past if you look at the price movement of gold) as compared to equities and finally acts as a store of value which can be pledged or sold in the case of dire straits.

Primarily the investment in gold in the past has been in the form of jewellery (worst form of investment in gold if considered from an investment purpose) or gold bars (of 1 gm, 5 gm, 10 gm or 1 tola etc). Some also Trade in Gold futures (will be discussed in future posts).

However, introduction of Gold exchange traded funds allow investors to invest in gold and hold them in a virtual form rather than physical form thus having significant benefits. These are essentially open ended funds that are listed and traded on exchanges like stocks where you can buy and sell them like stocks through stock brokers and hold them in the demat form. These are designed to provide returns that, before expenses (typically between 1% and 2% of the assets under the management will be considered as the management fee) as, closely correspond to the returns provided by physical Gold. Each unit of the mutual fund is approximately equal to the price of 1 gram of Gold.

What are Advantages of Investing in Gold exchange traded funds ?
• Potentially cheaper to have price exposure to gold price as compared to other available avenues such as jeweler, bank
• Quick and convenient dealing through demat account
• No storage & security issues for investors
• Transparent pricing as it is linked to international gold prices and traded in stock exchanges
• Taxation of gains is similar to that of Non equity Mutual Fund
• Listed and traded on stock exchange just like a stock therefore leading to 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

Schemes such as UTI MUTUAL FUND - UTI GOLD EXCHANGE TRADED FUND (NSE Code - GOLDSHARE) and BENCHMARK MUTUAL FUND - GOLD BENCHMARK EXCHANGE TRADED SCHEME (GNSE Code - OLDBEES) are some of the Gold exchange traded funds that have been launched some time ago.

Schemes such as Kotak Gold ETF are soon going to be launched.

Since the Gold exchanged Mutual Fund is classified as a Mutual Fund, investor need not pay wealth tax. The scheme will have Non equity Mutual Fund Taxation rules applicable as per current Tax laws, where investor has to pay the tax only after redemption. Typically the factors that affect the performance of the fund will be the following

• Closing price of gold in the London Bullion Market Association AM fixing price on that particular day in US$/ounce.
• Rupee to US dollar value. A rising rupee means that gold gets cheaper.
• Crude prices. Increase in crude prices will normally lead to increase in the gold prices.

Typically gold should constitute upto 5% of the portfolio of an individual's assets.