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
(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|
|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|
|SIP/STP/ SWAP Facility||N. A.||N. A.||Avalable|
|Bid ask spread||Very high||Can’t sell back||N.A.|
|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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