Wednesday, February 6, 2013
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Indian Real Estate News
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Gold market in India, is flooded with Gold ETFs and Gold funds. Common investors are confused a lot between the two. This page is trying to clear out the differences between Gold ETFs and Gold savings funds. Gold ETFs has been in the Indian markets for at least 3 to 4 years. Gold funds or Gold Savings fund introduce into the markets recently. Although the idea behind both the scheme is same, the route of investment varies. Both the scheme's motto is to get the benefit of price appreciation of Gold. Or in other words, to give the investors, the return that the Gold is making.
Both the funds are run by leading mutual fund houses. New and new entrants are coming with new schemes in the respective category. Now let us pinpoint the minute details of Gold ETFs and Gold funds.
Comparison of Gold ETF and Gold funds
| Sl No. | Attributes | Gold ETF | Gold Funds ( Gold Savings Funds) |
| 1 | What is? | Gold ETFs are units representing Gold in physical form and are available to the investor either as paper form or as Dematerialized form. | Gold funds are units representing the
units of respective mutual fund's Gold ETFs |
| 2 | Where is the investor's money going? | Investor's money is used to buy the physical Gold. 0% to 5% may be invested in money market instruments | Investor's money is used to buy the
units of Gold ETF of the mutual fund
house which offers the Gold fund. |
| 3 | Asset allocation | 95 to 100% in Gold and 0 to 5 % in money market instruments. | 95 to 100% in Gold ETFs and 0 to 5%
in money market instruments. There may
be some portion to keep the liquidity a
t the mutual fund level. |
| 4 | Who can invest? | Investors who have demat account can invest in the Gold ETF. | All investors, irrespective of demat account
can buy the Gold funds. No need to open the demat account to buy the units of Gold funds.
If the investor want to keep the units in
demat form, he can still do it, if he posses
Demat account. |
| 5 | How to buy? | From the stock exchanges | From the dealers of respective mutual
fund houses |
| 6 | Entry load | Nil | Nil |
| 7 | Exit load | Nil | 1% to 2.5 % depending upon the
time of sale of Gold fund units. |
| 8 | How to sell? | Through stock exchanges | Go the dealers or authorized centers
of respective
mutual fund house and sell the units |
| 9 | Expenses | 0.5% to 1.5% | 1.25% to 2 %. Higher than Gold ETFs.
Investors has to bear the expenses of
underlying Gold ETF also. |
| 10 | Tracking error | Tracking error is related with physical Gold | Tracking error is with Gold ETFs of the
parent company |
| 11 | Tax implications | After One year of holding, it is long term capital gain
tax | After One year of holding, it is long
term capital gain tax |
| 12 | Bench mark | With the physical Gold | With the Gold ETFs |
| 13 | SIP's available | Choice is limited | Wide choices to purchase the units as low as Rs.100. Varieties of SIP's or EMI
options is the one merit of Gold fund with Gold ETF. |
| 14 | Competition | 11 fund houses run the Gold ETFs | 4 fund houses are available |
| 15 | Liquidity risks | Liquidity risks exists | Liquidity risks exists |
| 16 | Trigger facility, add on facility | No | Yes |
| 17 | Which is better? | Gold ETF is better | Better for those who don't have demat account. |
So considering the above factors, Gold ETFs seems to be a better for choice out of two for the investors. For those who don't possess Demat account Gold funds are the only available option for investing in Gold. When considering the flexibility point of view Gold funds scores better. You have lot of SIP choices which can be selected according to your budget and there are trigger facility to buy and sell, add on facility to mop up your investments in Gold funds. But inexpenses point of view, Gold ets are better options. Those investors who have demat account, go for Gold ETFs and those who don't want to open demat account can go for Gold funds.
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