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SIPping on Gold

Get the best out of gold without having to invest directly in it through Gold ETFs…

Finally a gold fund that offers the benefit of disciplined and systematic investment

Irrespective of whether this asset is in a bubble or not, or whether investment advisors scream from the rooftop that it is not a good long-term bet (though many say otherwise), the lure of gold amongst Indians is legendary.

However, deciding how to invest in this asset class is not so simple. One can buy gold bars but then there is the issue of storage and insurance and selling them when required. Then there are funds that invest in gold mining companies abroad, such as DSPBR World Gold Fund and AIG World Gold Fund. There are also a few funds which combine gold as an asset besides equity and debt. But for a pure play on gold, there are the gold exchange traded funds (Gold ETFs).

Now Reliance Mutual Fund has gone one step ahead and introduced the Reliance Gold Savings Fund, ushering in complete ease of investing.

Today, Gold ETFs have a collective asset base of only Rs3,254 crore. A hindrance could probably be the need to have a demat account, which is mandatory for any ETF. It is on this count alone that this new fund offering Reliance is worth a look.

Reliance Gold Savings Fund is a passively managed Fund of Fund (FoF) that invests in Reliance Gold ETF. The latter invests in physical gold with 99.5 per cent purity.

Like all good things, this fund too comes with a few riders. If you plan to exit in the first year of buying the units, there will be an exit load of 2 per cent. But the bigger problem is the recurring dual expense that adds up to 1.5 per cent; 1 per cent in Reliance Gold ETF and 0.5 per cent in Reliance Gold Savings Fund. This is the cost of convenience that one will pay when investing in this fund.

At a glance
No need for a demat account
Investors who buy gold exchange traded funds (Gold ETFs) need to have a demat account. Not so in the case of this fund. Here investments can take place just like any other fund.
Liquidity
Investors can subscribe and redeem units on all business days directly from the AMC, while purchase and sale of Gold ETF units is a factor of liquidity on the exchange.
Cost effective
Investors do not have to incur charges like annual maintenance charges for a demat account, delivery and brokerage charges incurred for investing through the dematerialised mode.
Tax
The fund has a similar tax structure as applicable to debt mutual fund schemes.
Ease of investing
Investments can be done systematically via a systematic investment plan (SIP) with regular investments which are as low as Rs100 a month. Other facilities like Systematic Transfer Plan (STP), Systematic Withdrawal Plan (SWP), auto switch and trigger facility are also available, which would not be the case in an ETF.
Asset Allocation
A minimum 95 per cent will be invested in the units of Reliance Gold ETF. The balance, if any, will be in money market instruments, short-term fixed deposits, schemes which invest predominantly in money market securities or liquid schemes, either of Reliance Mutual Fund or a SEBI-registered mutual fund.