NFO: HDFC Gold Fund (HGF)

HDFC Mutual Fund has launched HDFC Gold Fund (HGF) on October 07, 2011 that will allow investors to apply in Gold ETF through lumpsum and SIP with amount as little as Rs. 500 per month. The fund aims generate returns that closely correspond to returns generated by HDFC Gold ETF.

Why to invest in Gold ?

• For effectively diversify portfolio: Gold is most valuable contribution to a portfolio lies in the fact that it has a low correlation with most other asset classes. This is due to the fact that the factors affecting the price of gold differ from those which influence the price of most other asset classes.

Why invest in HDFC Gold Fund (HGF) ?

• Investment Objective: To seek capital appreciation by investing in units of HDFC Gold Exchange Traded Fund (HDFC GETF).

The following benefits are available:

• Demat account not mandatory: Investors can invest in HGF through the regular process of subscription i.e. in physical mode. The subscription through demat mode is an option for the investor but not a mandate to invest in HGF.
• Cost Effective: Investing in HGF in physical mode enables you to invest at a lower cost as the investor does not have to incur the charges for the demat account and brokerage . However , the investors will have to bear the recurring expenses of the scheme, in addition to the expenses of the underlying scheme.
• Liquidity: Investor can subscribe or redeem the units of HGF on all business days directly with the Fund.
• Taxation: Investment in HGF units will attract the benefits of long term capital gain tax after 1 year of holding, whereas for physical gold the benefit of long term capital gain is available after 3 years of holding. No wealth tax is applicable on the value of the holdings of HGF unit

Download HDFC Gold Application Form

HDFC Gold ASBA Form

(Note : No charges will be deducted on this Application Form by AMC)

How HGF is better than physical Gold

Parameter	Jeweller	Bank	HDFC Gold Fund
How gold is held	Physical (Bars / Coins)	Physical (Bars / Coins)	Units
Pricing	Differs from one another. Neither transparent nor standard	Differs from bank to bank, not standard	Linked to the prices of HDFC Gold ETF. The ETF is linked to international gold prices and is very transparent.
Buying premium above gold price	Likely to be more	Likely to be more	Likely to be less
Impurity risk	High	Nil	Nil
Storage requirement	Locker/Safe	Locker/Safe	None
Security of asset	Investor is responsible	Investor is responsible	Fund house takes the responsibility
Resale	Conditional and uneconomical	Banks do not buy back	At NAV Based Prices
Convenience in buying / selling	Less convenient, as gold needs to be moved physically	Less convenient, as gold needs to be moved physically	More convenient, as can be bought from and sold to the mutual fund at applicable NAV
Quantity to buy / sell	Available in standard denomination	Available in standard denomination	Minimum application amount is Rs 5000 and any amount thereafter
Long term capital gains tax	Only after 3 years	Only after 3 years	Only after 1 years
Wealth tax	Yes	Yes	No
SIP/STP/ SWAP Facility	N. A.	N. A.	Avalable
Bid ask spread	Very high	Can’t sell back	N.A.

Scheme Features

Type of Scheme	An Open Ended Fund of Fund Scheme investing in HDFC Gold Exchange Traded Fund
Investment Objective	To seek capital appreciation by investing in units of HDFC Gold Exchange Traded Fund (HGETF).
Liquidity	The Scheme will offer Units for Sale / Switch-in and Redemption / Switch-out on every Business Day at NAV based prices on an ongoing basis, commencing not later than 5 Business Days from the allotment of Units of the Scheme.
New Fund Offer Price	Offer of Units at Rs 10 during the NFO period.
Benchmark	Domestic price of physical gold.
Entry Load	Not Applicable
Exit Load	2% if redeemed/switched-out before 6 months from the date of allotment
	1% if redeemed/switched-out on or after 6 months but within 1 year from the date of allotment
	Nil if redeemed/switched-out on or after 1 year from the date of allotment
Minimum Application Amount	Purchase (including switch-in): ` 5,000 and any amount thereafter
	Additional Purchase (including switch-in): ` 1,000 and any amount thereafter
	SIP Purchase: Minimum Amount per Installment Monthly SIP: ` 500/- and in multiples of ` 100/- . Quarterly SIP: ` 1,500/- and in multiples of ` 100/-

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Tags: gold etf, HDFC Mutual Fund, nfo, NRI, October 2011

Category: Blog, Gold Units, Mutual Fund, NFO, NRI