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

TDS Rate and Personal Account Number(PAN)

    The TDS rate doubles to 20% from 10% if you fail to mention your Personal Account Number   IF you run a glance through your pay slip, you will come across something called TDS, which is tax deduction at source. In most cases, the employer deducts this amount at the time of payment of salary itself and pays the total tax amount to the government on behalf of all the employees. If you are a self- employed or practicing professional s, you have to pay this amount yourself.    Tax deducted at source is one of the modes of income tax collection by the government. Under the income-tax laws, income tax at specified rates is required to be deducted while making certain payments.    The rate of deduction of tax at source on interest and rent payment is 10%. For salary payments, the employers deduct income tax at source on a monthly basis after computing income tax liability on estimated annual taxable income of the employee. Tax benefits on housing loan, investments, etc are consid...

Equity investors should track market developments

The stock markets have been volatile over the last few days. They are in a sideways movement and trying to find the bottom after a fall of 20 percent a week ago. The market sentiments are not very positive at the moment and the recent developments are expected to dampen them further. Globally, governments and central banks are trying to cut rates and announce packages to improve business sentiments. These are some of the major developments in the markets last few month: A) Global On the global front, another large US bank went into a financial crisis. The US government took quick measures to avoid the spread negative sentiments in the markets. The US government announced a bail-out package and agreed to shoulder the losses on the bank's risky assets. China announced a large cut in interest rates and reserve ratio to boost the investor sentiments in the markets. Recently, the World Bank announced China's growth rate next year will come down to 7.5 percent. The European ...

Banks tweak ATM strategies

Unrestricted usage of third-party ATMs ends on Thursday The era of free ATM usage will come to an end on Thursday, October 15. Every transaction carried out on another bank’s ATM could cost an account holder as much as Rs 20 and withdrawals will face a limit of Rs 10,000, the Indian Bank’s Association has said in its guidelines. According to the guidelines, banks can offer savings-account holders five free thirdparty withdrawals every month —they can be charged from the sixth transaction onwards. Current account holders can be charged the fees, which ranges from Rs 18 to Rs 20, from the very first transaction. Most banks are convinced that charging current account and no-frill account customers from the word go is a good idea. It suggests that the usage of ATMs by current-account holders is price-insensitive. For others, banks have decided to frame their charges depending on the profile of the customer. For instance, HDFC Bank is allowing its salary account and premium customers an unl...

Fortis Mutual Fund

Fortis Mutual Fund, a relatively new player, it is still to prove its case and define its position in the industry. In September 2004, it came onto the scene with a bang - three debt schemes, one MIP and one diversified equity scheme. And investors flocked to it. Going by the standards at that time, it had a great start in terms of garnering money. Mopping up over Rs 2,000 crore in five schemes was not bad at all. The fund house has not been too successful in the equity arena, in terms of assets. Though it has seven equity schemes, it is debt and cash funds that corner the major portion of the assets. Most of the schemes are pretty new, and the two that have been around for a while have a 3-star rating each. The last two were Fortis Sustainable Development (April 2007), which received a rather poor response, and Fortis China India (October 2007). Fortis Flexi Debt has been one of the better performing funds, after a dismal performance in 2005. It currently has a 5-star rating. None ...

JP Morgan ASEAN Offshore Fund

  JP Morgan ASEAN Offshore Fund - Invest Online JP Morgan ASEAN Offshore Equity Fund is an international equity mutual fund scheme that invests primarily in companies of countries which are part of the Association of South East Asian Nations (ASEAN). Most international funds , apart from those focused on the US market, have been struggling for sometime. This is because of the uncertainties in the global market. International funds are meant for investors who want to diversify their investments across geographies. If you haven't made your investment for this diversification, you should sell your investments in this scheme.   Best Tax Saver Mutual Funds or ELSS Mutual Funds for 2015 1. BNP Paribas Long Term Equity Fund 2. Axis Tax Saver Fund 3. IDFC Tax Advantage (ELSS) Fund 4. ICICI Prudential Long Term Equity Fund 5. Religare Tax Plan 6. Franklin India TaxShield 7. DSP BlackRock Tax Saver Fund 8. Birla Sun Life Tax Relief 96 9. Reliance Tax Saver (ELSS) Fund 10. HDFC TaxSaver...
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