After Reliance launched its innovative gold savings fund, Kotak has launched an identical product
The Kotak Gold Fund launch comes within days of the launch of Reliance Gold Savings Fund, the first gold fund-of-funds in the industry. (Reliance Gold Savings Fund has a strange target group).
Similar to Reliance Gold Savings Fund, this is another fund-of-fund kind of scheme and investors must understand this offer very clearly. It's a gold ETF (exchange traded fund) based fund-of-fund scheme which will invest only in Kotak gold ETFs. The New Fund Offer (NFO) opens on 4th March and closes on 18th March.
Apart from being able to invest without a demat account, these funds help retail investors invest smaller sums. Reliance had a minimum investment limit of Rs100 per month in its gold savings fund. Kotak allows investors to start their investment with Rs1,000 per month through an SIP (systematic investment plan) route. This genre of gold funds generally bears an expense ratio of 1.5%.
Returns from gold exchange traded funds feeder funds do not attract wealth tax, as is the case with physical gold transactions. Not to be left behind, even stockbrokers have begun launching gold fund-of-funds using their portfolio management scheme licences.
Destimoney Securities has launched a structured gold reserve fund, which aims to protect investors from gold price fluctuations.
At a time when gold is making new highs, asset managers and brokers are queuing up to launch gold saving schemes which will enable retail investors to park their money in gold ETFs without demat accounts and through SIPs. Reliance tried to reach a common class of people who did not have demat accounts and were interested in investing in gold. It targeted the medium class which resembles a majority of the population. Obviously the other fund houses cannot lag behind. So Kotak MF started the rally and there will be many more to join.
As pointed out by Moneylife in an article dated 18 February 2011, "The price of gold has gone up six times in the last 10 years. Any asset that has gone up so much for so long a time carries a huge risk of a crash. How will a risk-averse investor react to an asset that can crash suddenly?"
Fund companies and intermediaries don't usually point out these kinds of risks in their offer documents.
Inside story of the National Stock Exchange’s amazing success, leading to hubris, regulatory capture and algo scam
Fiercely independent and pro-consumer information on personal finance.
1-year online access to the magazine articles published during the subscription period.
Access is given for all articles published during the week (starting Monday) your subscription starts. For example, if you subscribe on Wednesday, you will have access to articles uploaded from Monday of that week.
This means access to other articles (outside the subscription period) are not included.
Articles outside the subscription period can be bought separately for a small price per article.
Fiercely independent and pro-consumer information on personal finance.
30-day online access to the magazine articles published during the subscription period.
Access is given for all articles published during the week (starting Monday) your subscription starts. For example, if you subscribe on Wednesday, you will have access to articles uploaded from Monday of that week.
This means access to other articles (outside the subscription period) are not included.
Articles outside the subscription period can be bought separately for a small price per article.
Fiercely independent and pro-consumer information on personal finance.
Complete access to Moneylife archives since inception ( till the date of your subscription )
