Review of Quantum Gold Fund (Gold ETF): Finance Trading Times

Review of Quantum Gold Fund (Gold ETF)

The famous and well known fund house Quantum Mutual Fund has come out with its first ever commodity-related mutual fund offering – titled as the Quantum Gold Fund.

Review of Quantum Gold Fund: Exchange Traded Fund
The Quantum Gold Fund is an open-ended Exchange Traded Fund (ETF), which will be listed on the National Stock Exchange of India (NSE), closely tracking the domestic prices of gold. Since its an open ended fund, any number of units can be created and redeemed at any time, as per the demand and supply requirements. Usually, there have been not many commodity based ETFs in India. We do have UTI Gold traded exchange fund and one or two more such offerings, but the choices are limited for investors looking for investing in such funds.

Should I invest in Quantum Gold Fund:

Traditionally, India has been the biggest consumer of gold and that holds true till date. However, high prices of gold have now made gold out of reach of the common man. Someone with just 5000 to 6000 amount cannot even think of buying 10 grams of gold, as the gold prices are hovering in the range of 11,00-12000. Hence, Investing in ETF’s which have lower prices for each unit can help the small investors.

How Gold based ETF’s help?

Gold (or any commodity) based ETF’s try to track the gold prices and if the fund management is efficient enough, then the fund unit price almost exactly replicates the price of gold in the market. However, the advantage of (gold based) ETF is that you don’t need to have the big amount of 11,000 to invest in gold. All you can simply do is buy a unit of such gold based ETF at a price which may be anything from 10 to 1000 per ETF share, and let it gain (or loose) in percentage terms while tracking the gold prices. Hence, it gives a very good option to investors who want to invest in gold (or other commodities) without actually buying it.

Another advantage of gold based ETF is that you don’t need to worry about safe storage of the gold. Since the ETF is bought as a share, it sits in your demat account. Hence, the worries of theft or loss of actual gold ornament or bars is gone.
However, one thing you must note is that buying ETF does not guarantee any returns. Since it tracks the gold prices, it can give you losses too. If you buy ETF worth 10 Rs. a unit when the gold price is at 10,000 and after one year the gold prices fall down to 8,000, then your ETF unit cost will also come down to Rs. 8 or so. Hence, there is no guarantee of profits.

Another disadvantage is the cost of brokerage or fund management charges – which one should be aware of while making investments.

The New Fund Offer (NFO) of the Quantum gold ETF scheme would be open from Thursday, 24th January, 2008 to Friday, 8th February 2008. During this NFO period, investors can subscribe to the scheme with a minimum investment of Rs 5,000 and further multiples of Rs 1,000. The Quantum Gold Fund seeks to offer investors an innovative, cost-efficient and secure way to invest in gold. The Fund enables investors to buy gold without the hassles of holding and storing physical gold. The Fund will closely track, before expenses, the movement in the price of the underlying asset-physical gold of 0.995 fineness. The good thing is that the Quantum Gold Fund will be the first Gold ETF in the country without any entry load during the NFO. Investors can try their luck on gold prices!
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5 Comments: Post your Comments

Amit said...(on 29 January 2008 at 05:32 )  

Hi Shobit,

Surprise surprise,,,,you are a big supporter of ETFs and its very strange to find that you don't mention much about Benchmark AMC, which has only ETFS. Even while comparing with Quantum Gold ETF, you didn't compared it with Benchmark's GOLDBEES which was the first GOLD ETF to be launched in India.

Any personal choices to do with this. It w

Investment n Trading Advisor said...(on 29 January 2008 at 19:30 )  

Hi Amit,

I guess you have left your comment incomplete (It ends with "It w")

Anyways, it is in the NFO or new fund offering period. No historical data is available for this fund performance. Hence it is not possible to compare it with the benchmark.


Basin said...(on 30 January 2008 at 05:43 )  

lets think logically...
1. you are not buying actual gold with this money (so no physical asset)
2. you might not even get good returns...lots of other options are there (practically thinking)

so at the end of the day, you just have some money at your disposal which can (if invested properly) fetch you good returns elsewhere
so is there any merit in buying into such funds?

Anonymous said...(on 6 March 2008 at 21:33 )  

Can some one compare the entry and exit loads of the UTI, Reliance, Quantum and BEES Gold funds. this will help investors select the right product. Also,what is typically the holding period of these GOLD ETFs

Anonymous said...(on 6 March 2008 at 21:33 )  

Can some one compare the entry and exit loads of the UTI, Reliance, Quantum and BEES Gold funds. this will help investors select the right product. Also,what is typically the holding period of these GOLD ETFs

Wish you all happy and fruitful trading and investing activities with safety! = = = Post a Comment

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