Who should invest in Reliance Gold Savings Fund?

Mutual Funds | admin | February 25, 2011 at 9:03 am

Till now if you wanted to buy physical gold, you could either buy an gold exchange traded fund (ETF) on the stock exchange, or e-gold through the National Spot Exchange. While it is tough and risky to store physical gold, for buying an ETF you need to have a demat account. Also, it was tough to do SIPs, and very few broking firms offered SIPs for ETFs. To eliminate these difficulties, Reliance Mutual Fund has come up with a new concept where you can invest in gold without having a demat account. The issue is current open and closes on February 28.

THE PRODUCT

Reliance Gold Savings Fund is an open-ended fund of funds scheme, which is passively managed and will invest primarily in Reliance Gold Exchange Traded Fund. Its returns will, therefore, mirror the returns of Reliance Gold Exchange traded fund. While there is no entry load, there is an exit load of 2% if you redeem or switch out units on or before completion of one year from the date of allotment of units. The minimum amount on application is Rs 5,000. You can also do a SIP of an amount as little as Rs 100 per month. Financial planners recommend gold as an alternate asset class for your portfolio and recommend investors to have 5-10% of their portfolio in gold. Gold is considered a safe bet and a hedge against inflation by some.

WHO SHOULD APPLY

Investors who wish to build up their gold portfolio and hold gold as an asset class in their portfolio, could apply. Besides this, investors who do not want to go through the hassles of operating a broking account and opening a demat account, could consider buying gold through this SIP.

WHY NOT TO APPLY

Being a fund of funds, the expense ratio here is likely to be higher, compared to an exchange traded fund. While the expense ratio for the most liquid Benchmark Gold Exchange traded Fund is 1%, Reliance Gold Savings fund will have a higher expense ratio of 1.5% per annum. Hence, investors holding a demat account, may find it marginally cheaper to buy ETFs instead of applying in this fund.

Source: Economic Times