High on the heals of recently launched Gold funds like ICICI Gold Savings Fund and Axis Gold Fund, another renowned mutual fund house, HDFC Mutual Fund house, has joined the bandwagon of so called Gold Saving Funds and come out with a new fund offer or NFO, for its newly launched fund called HDFC Gold Fund
Looking at the flood of these Gold based Funds coming in the market in the recent times, we've been feeling a bit tired to write about them one after the other :-), but looks like the mutual fund houses are tired in bringing the same products which works in the same way as other similar products from other fund houses, again and again in the market. Who doesnt like to get a share when the entire world is going crazy with gold prices highs (and recent lows). Dollar isn't looking good, Gold looks promising, add some "saving fund" terminology, pitch in for investors to go with small amounts of SIP and there you have a new Gold Based Fund.
The HDFC Mutual Fund House is launching their HDFC Gold Fund. In this article, we will analyze how good is this HDFC Gold Fund NFO, whether this HDFC Gold Fund offers anything new or unique for the investors and whether the investors should invest in HDFC Gold Fund.
HDFC Gold Fund NFO: Review Analysis & DetailsLet's begin with some basic details about HDFC Gold Fund.
What are the NFO dates for HDFC Gold Fund?
The NFO period for HDFC Gold Fund is from 7th October and will close on 21 October 2011. After the NFO period, the regular buying and redemption of fund units will start, on date still not known by us.
What is so unique about this HDFC Gold Fund?
Nothing special, if you are already aware of exactly the similar products available and being flooded in the market since last many months by various fund houses. The concept is simple - Mutual Fund houses have a product called a "Gold ETF". On top of that, they lauch another product called a "Gold Fund". What then happens is that money invested through this Gold fund is actually routed to Gold ETF. The Gold ETF prices keep moving as per the prices of actual physical gold and hence the returns of this Gold fund also keeps moving. So, in essence, this is actually a Fund of Fund (What's this?). What it means is that this fund will not invest in any Gold companies or Gold stocks diectly, instead it will invest in other fund, Called HDFC Gold ETF or Exchange Traded Fund. It is this ETF which will actually invest in physical gold.
Now, we've written a lot about these so called "Gold Funds" or "Gold Savings Funds".
They offer low amount investments in gold (although this HDFC Gold Fund requires minimum 5000 Rs. investment, other Gold Funds need only Rs. 100). They do not require demat account, etc. SIP requries only 500 Rs. per month and 1500 per quarter for a quarterly SIP.
But they do come with disadvantages like you cannot trade in them on real time basis as this pricing in based on End of the day NAV kind of model. See more articles in next section about competitor products to better understand this gold fund business.
What are the other competitor products available in comparison to HDFC Gold Fund?
The list is endless. Hardly anything looks different. The recently lauched Axis Gold Fund, then the ICICI Gold Savings Fund, SBI Gold Fund and Reliance Gold Savings Fund (See Review & Details) are the biggest and direct competitor to HDFC Gold Fund.
Other than that, there are a lot of Gold based ETF's and Gold based Mutual Funds available:
List of Gold ETF India available for trading on NSE
HDFC itself has its own ETF: HDFC Gold ETF NFO: Review Analysis & Details apart from others like Quantum Gold Fund (Gold ETF) ICICI Prudential Gold ETF, then SBI GETS-SBI Gold ETF NFO Review: SBI Gold Exchange Traded Scheme and so on.
Other Gold Schemes: Quantum Gold Fund
What are the risks of investing and trading HDFC Gold Fund?
The benchmark for HDFC Gold Fund is the Domestic Price of Gold. By investing in such a fund, you are taking the risk on gold price fluctuations. If the price of gold fluctuates, so will the returns from this fund will change.
Also, since this is fund of (single) fund, the tracking error will surely creep in - although it will be based on end of the day pricing.
Final Thoughts about HDFC Gold Fund?
Another Gold Fund or Gold Saving fund offering investments in gold which are similar to the so many different products already available in the market. One can go for investment in this HDFC Gold Fund if they believe that gold prices will continue to rise and trust Axis fund managers to generate accurate returns on gold prices with minimal tracking error.
See List of All Mutual Fund and NFO Articles here
During NFO period each unit cost Rs. 10 per unit
Minimum investment Rs 5,000 and in multiples of Re 1 afterwards.
No tax benefit will be available in HDFC Gold Fund. There is no lock-in period for this Gold Fund i.e. investors can enter and exit anytime they like, but they need to pay exit load charges as mentioned.
Mr. Anil Bamboli will be the fund manager for HDFC Gold Fund.
Only Growth Option is available for HDFC Gold Fund.
HDFC Gold Fund Entry Load: Nil
HDFC Gold Fund Exit Load: 1% if exit within 1 year ; 2% is exit within 6 months (this is high compared to other gold funds)
NIL beyond 1 year.
SIP or systematic investment plan? Yes.
Minimum SIP is Rs. 500 per month and Rs. 1500 per quarter and further in multiples of Rs. 100 per month.
Domestic Price of Gold will be the benchmark for tracking the performance of HDFC Gold Fund