Prajna Capital - An Investment Guide

Use GOLD FUND to Capitalize on rising gold price - How Gold Fund works for investors keen on exploiting the yellow metal’s potential With the recent spurt in the price of gold, gold funds are looking brighter. Recently, a gold exchange-traded fund ( ETF ) touched its all-time high of Rs 1,504 on the National Stock Exchange and closed at Rs 1,503 per unit. Other gold ETFs have touched new highs as well. There has been higher buying interest in gold ETFs. The price of gold here crossed Rs 15,000 per gram. The international price is around USD 962 per ounce. Higher global gold prices, combined with the rupee going below 49 to a dollar, helped in the surge in gold prices here. Gold ETFs have delivered a handsome return of about 30 percent over last one year. Gold ETFs have the basic characteristics of mutual funds. They are traded like stocks on the exchanges. The fund is available for investments on the stock exchange, and it can be bought and sold like any stock. An ETF is norm...

An ETF is like an index fund in terms of its portfolio. The basket of stocks is in the same proportion as the pre-decided index. The initial participants give the fund the basket of stocks and in turn take units of the fund in exchange. These units are then traded on the stock exchange through stock brokers. So investors who wish to take up units of an ETF require a demat account. The price of an ETF fluctuates with the fluctuation in the underlying index throughout the trading day. The NAV is usually a fraction of the value of the index, like one-tenth or one-hundredth. But the value at which it is traded is a function of its demand and supply. So ETF units can trade at premium or at discount. The benefit of an ETF to an AMC is more or less the same as it would be in case of any other mutual fund. But since it tracks an index, it doesn’t require active management of the underlying portfolio.

The yellow metal is a good avenue now for short-term investors Every time equity and other markets turn bearish, investors turn to the yellow metal to park funds. It has been no different this time as gold has turned the new safe haven for many. As would happen in every boom market, investors chase an instrument even if it is on the rise on a continuous basis. In fact, it has happened with various other instruments like equity, property, crude oil, and it seems to be the turn of gold which has been scaling a new peak at regular intervals. Expectedly, new highs are being projected for the yellow metal. Needless to say, investors need to be slightly cautious with their investment strategies as it is easy to get carried away by the current environment. While gold is definitely an option for the next 12-24 months, the instrument too carries its baggage of risks at the current levels. More importantly, rather than demand, other factors such as growing comfort of investors and increasi...

Like your colleagues who throw a warm farewell for you when you leave after putting in substantial years, your employer too has a small, but significant, way of singing 'he's a jolly good fellow' to reward you for your service to the organisation. He does so by giving you a free lump sum of cash - called gratuity in financial parlance - on your exit. The amount that he gives is based on the number of years of service you have put into the organisation. Read on to know more about this little-known windfall and some ideas about what you can do with the free money that comes your way. When are you entitled? Gratuity in earlier days was rather arbitrary and completely hostage to the whims of the employer. A wealthy, well-established employer would reward his dedicated employees and the not so rich would refuse such generosities. This led to a lot of discord and finally the government stepped in, passing the Payment of Gratuity Act, 1972, making it mandatory for all employers wi...

They can be bought and sold throughout a trading day like any stock An exchange-traded fund ( ETF ) is a basket of securities that are traded on an exchange. They first came into existence in the US in the early 90s. Initially, these were looked upon with suspicion. However, of late, these funds have been attracting the interest of investors globally. ETFs are different from mutual funds. ETF units are not sold to the public for cash. Instead, the asset management company that sponsors the ETF takes the shares of companies comprising the index from various categories of investors like authorized participants, large investors and institutions. In turn, it issues them a large block of ETF units. In case any dividend is accumulated for the stocks at any point in time, a cash component to that extent is also taken from such investors. A large block of ETF units called a 'creation unit' is exchanged for a 'portfolio deposit' of stocks and the 'cash component' . Unl...

Is Gold A Golden Investment? There is considerable action in the other non-financial fund category, namely, gold. There are two kinds of gold-related funds in India. One is the so-called gold ETFs, which act as proxies for holding gold in physical form. Fund companies that run gold ETFs invest all of the investors' money in gold. Thus, the money invested in such funds makes profits or losses exactly in line with the price of gold, after charging around 1 per cent per annum as expenses. In the year or so since the first gold ETF was launched these funds' number has grown to five with few more in the pipeline. For a niche fund type, they've proven reasonably popular and hold assets of Rs 550 crore. However, when one compares these funds to the amount of gold that is traded in the commodity markets, this is a pittance. However, it's the other kind of gold fund that is having a more interesting time. These are funds that invest in the stocks of gold mining, refining and ma...