Skip to main content

Gold Feeder funds are the best option for SIP investors, ETFs for lump sum

 There are four avenues to invest in gold. You can do so through

Ø       physical gold (coins and bars),

Ø       gold exchange-traded funds (ETFs),

Ø       feeder funds and

Ø       the e-series (popularly called, e-gold) launched by the National Spot Exchange.

Of these, paper gold is favoured unanimously as an investment avenue. Buying physical gold is not attractive because of the higher purchase price and lower selling price. Storage and safety are the other issues.

Gold ETFs, the oldest form of paper gold, are not favoured by many, as these require a demat account to invest. Fund houses levy an expense ratio of only one per cent. But the extra charges come by way of the brokers' fee of up to 0.5 per cent. The annual maintenance cost of a demat account is `400-500.

Next is the e-gold option. The costs here are similar, but only in the first month. Since e-gold allows Das to invest through systematic investment plans (SIPs), her first month's cost (`400-500) would reduce from the second month, as she will be only incurring brokerage costs. One can accumulate the units over time. And, use these for child's marriage or making jewellery in the future.

However, if you opt for physical delivery, costs will increase further. The delivery option should be the last resort, because of the delivery fee of `200, irrespective of the quantity, and `50 for every such request charged by the depository.

At present, the National Spot Exchange allows exchanging e-gold units into coins or bars of 8, 10, 100 gm and one kg. It charges `200 each for conversion of 8 and 10 gm coins, 100 for 100 gm and no charge for one-kg bar. You will also have to pay a value-added tax at one per cent and Octroi for conversion of electronic units into physical coins (for Mumbai = 0.1 per cent).

You can buy gold in its physical form, such as coins and bars, only from banks and jewellers. Typically, banks will charge you between 1015 per cent higher than the market price. Jewellers will sell it for 5-10 per cent higher. The option is the post office. They charge a premium of 15-20 per cent on gold coins. If Das were to purchase gold from banks, jewellers or post office, she will lose anywhere between five and 20 per cent ( `250-1,000) Finally, there are gold feeder funds. If you do not have a demat account, gold feeder funds are a good option, as it does not make sense to open a demat account only for buying gold via ETFs. In addition, there is an option to do SIPs as well. The only expense here is the expense ratio of 1.5 per cent. This implies that Das will be able to save 4,925 (expense ratio `75) the highest among the four options.

PHYSICAL GOLD

Sold at: 5-10 per cent higher price

Banks don't buy back, jewellers buy back at 10 per cent lower price

GOLD ETFs

Brokerage: up to 0.5 per cent

Expense ratio: 1 per cent

Demat maintenance cost `400-500

Can be redeemed on the exchanges; SIP not offered

GOLD FEEDER FUNDS

Expense ratio: 1.50 per cent

Can be redeemed; SIP allowed starting `100

E-GOLD

Brokerage: 0.25-0.5 per cent

Transaction fee: `20 per transaction

Demat maintenance cost: `400-500

Can be sold at National Spot Exchange; minimum 1 gm gold can be bought via SIP

 

Popular posts from this blog

Systematic withdrawal plan

  Start Systematic withdrawal plan Online Although an SWP gives you regular income and saves on taxes in the long term, you cannot open an SWP on a scheme where you have an ongoing SIP   iStockPhoto If you are planning to take a sabbatical from work or are retiring soon, you may be looking at different investment options that give a regular income. Usually, a lump sum is invested to get regular fixed amounts later. Popular products include post office monthly income scheme, Senior Citizens' Savings Scheme and monthly income plans (MIPs). A lesser known option is the systematic withdrawal plan (SWP) in mutual funds. Recently, some funds have even removed the exit load on SWPs if you were to withdraw up to 15-20% in the first year, to encourage people who want to start investing in this instrument. Here is a look at what an SWP is. WHAT IS SWP? Many of us would be familiar with a systematic investment plan (SIP ), where a corpus ...

Mutual Fund Review: Religare Tax Plan

Tax Plan is one of the better performing schemes from Religare Asset Management. Existing investors can redeem their investment after three years. But given the scheme's performance, they can continue to stay invested   Given the mandated lock-in period of three years, tax saving schemes give the fund manager the leeway to invest in ideas that may take time to nurture. Religare Tax Plan's investment ideas revolve around 'High Growth', which the fund manager has aimed to achieve by digging out promising stories/businesses in the mid-cap segment. Within the space, consumer staples has been the centre of attention for the last couple of years and can be seen as one of the key reasons for the scheme's outperformance as compared to the broader market. It has, however, tweaked its focus and reduced exposure in midcaps as they were commanding a high premium. The strategy seems to have worked as it returned a 22% gain last year. Religare Tax Plan has outperformed BSE 100...

Stocks with a high dividend yield

Buy Gold Mutual Funds Invest Mutual Funds Online Download Tax Saving Mutual Fund Application Forms Call 0 94 8300 8300 (India) Stocks with a high-dividend yield can provide investors additional cash flow. More importantly, it is tax-free   With April 2011 just over, the 'earnings season' is well and truly here. This is the time most companies pay out a portion of their profits as dividends to shareholders. Since dividends are tax-free, they are an attractive income source with a select class of investors, who depend on these for additional cash flow. SIGNIFICANCE A company doing well and generating profits will usually be in a position to declare dividends regularly. Hence, a key parameter one should look at whilst investing in a stock is whether the company has a good dividend record. Typically, dividend yield stocks are large-caps and generally not capital-intensive. This is suggestive of the fact that the downside risk on...

Assured Nivesh Plan and Smart Suraksha Plan

  Canara HSBC Oriental Bank of Commerce Life Insurance Company has added two new products to its suite -   Assured Nivesh Plan Smart Suraksha Plan   both designed to protect and meet future financial needs.   Assured Nivesh Plan is a traditional endowment plan that caters to the need of savings along with life cover in a single plan. This plan offers limited premium payment options where an individual pays premiums for a limited number of years and yet enjoys the benefits for the complete policy term.   Smart Suraksha Plan is a cost effective pure protection plan that provides insurance coverage against untimely death, thereby, helping one secure their family's financial future. ----------------------------------------------- Invest Rs 1,50,000 and Save Tax under Section 80C. Get Great Returns by Investing in Best Performing ELSS Mutual Funds Top 10 Tax Saver Mutual Funds to invest in India for 2016 Best 10 ELSS Mutual Funds in india for 2016 1. BNP Paribas Long Term Equi...

HSBC MIP Savings Fund dividend

Invest HSBC MIP Savings Fund Online   HSBC Mutual Fund   has announced dividend under the following schemes: Scheme Dividend ( R /unit) HSBC Income Investment-DQ 0.1733436 HSBC Flexi Debt Direct-DQ 0.18056625 HSBC Flexi Debt-DQ 0.18056625 HSBC MIP Regular-DQ 0.18056625 HSBC MIP Savings-DQ 0.2022342 HSBC MIP Savings Direct-DQ 0.2022342                     The record date has been fixed as June 27, 2016.     ----------------------------------------------- Invest Rs 1,50,000 and Save Tax under Section 80C. Get Great Returns by Investing in Best Performing ELSS Mutual Funds Top 10 Tax Saving Mutual Funds to invest in India for 2016 Best 10 ELSS Mutual Funds in india for 2016 1. BNP Paribas Long Term Equity Fund 2. Axis Tax Saver Fund 3. Franklin India TaxShield 4. ICICI Prudential Long Term Equity Fund 5. IDFC Tax Advantage (ELSS) Fund 6. Birla Sun Life Tax Relief 96 7. DSP BlackRock Tax Saver Fund 8. Reliance Tax Saver (ELSS) Fund 9. Religare Tax Plan 10. Birla Sun Life Tax Plan I...
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now