Taking advantage of the love Indians have for gold, Sundaram Mutual Fund has launched Sundaram Equity Plus, a fund that would invest in a mix of stocks and gold. The fund is an open-end scheme, which will invest between 65% and 85% in equity and a maximum of 15% to 35% in gold exchange traded funds (ETFs).
The fund is the first of its kind to offer a mix of equities and gold. The scheme will primarily focus on opportunities in Indian equities with the addition of gold ETF to provide diversification and exposure to the yellow metal in certain phases.
The equity portion of the fund will be invested primarily in large caps, benchmarking itself to the Nifty. Given the fact that the Indian economy is expected to grow at 8% for the next few years, and India's attractiveness amongst emerging markets, equities are expected to do well over the long term.
Gold, on the other, has been shining in recent times. It has outperformed other asset classes such as equity and debt over one-year as well as 10-year periods.
Following the sub prime crisis in 2008, investor interest in gold has increased and many have started considering it as part of their asset allocation. Gold prices have risen almost 30% in the last one year on account of a number of factors such as uncertainty in the eurozone and rising inflation. However, investors must remember that gold, too, is a commodity and it is not necessary that it will only continue to move upwards. Recently, silver moved down almost 30% in a span of three trading sessions.
The minimum amount of investment in the scheme is . 5,000.There is no entry load, but there is a 1% exit load if the fund is redeemed within 12 months from the date of allotment.
WHY INVEST: Since the fund invests more than 51% in equity, there will be zero long-term capital gains tax
WHY NOT TO INVEST: Instead of investing in this product, investors could invest in equity funds and a gold exchange traded funds directly.
