It was recently that the Birla Sun Life Mutual Fund house came out with its Gold based ETF or Gold Exchange Traded Fund: Birla Sun Life Gold ETF-NFO (See Details) and now there seems to be a race among the mutual fund houses to launch Gold based mutual funds, EETF's and Savings Funds. So here is one from the Quantum Mutual Fund house called the Quantum Gold Savings Fund
In this article, we will analyze how good is this Quantum Gold Savings Fund NFO, whether this Quantum Gold Savings Fund offers anything new or unique for the investors and whether the investors should invest in Quantum Gold Savings Fund.
Quantum Gold Savings Fund NFO: Review Analysis & Details
Let's begin with some basic details about Quantum Gold Savings Fund.First thing that you need to understand is that this is NOT a mutual fund, rather it's a fund of fund, or better to say "fund of single fund". Sounds Confusing? But that's what it is.
Basically, what this Quantum Gold Savings Fund will do is take money from individual investors and invest that money in their own Gold based ETF called the Quantum Gold Fund (Gold ETF - QGF). Hence, your invested money will ultimately reach the Gold ETF by Quantum Fund house.
What are the NFO dates for Quantum Gold Savings Fund?
The NFO period for Quantum Gold Savings Fund is currently open and will close on 12 May 2011.
What is so unique about this Quantum Gold Savings Fund?
I dont see anything special about this Quantum Gold Savings Fund. What is the point in creating another fund product in the name of "Savings Fund" when the invested money is to be put in another ETF run by the same fund house?
This being an EOD product, the NAV amounts will be calculated End of the day, while if you directly invest in the Quantum Gold ETF, you can attempt to benefit from the intraday price movements as the ETF tracks the prices of gold all throughout the trading day.
Anyways, on the positive side, this has a low minimum application amount of just Rs. 500, so makes good for small investors who may like to put only small amounts of money in gold in a periodic fashion. But again, why cant the same be done directly in the Gold based ETF?
I also have objections to the name "Savings Fund" - this will track the price of gold. They may go up and might asa well go down. There is no guarantee of assured returns like those offered by regular bank "savings accounts" - like 3.5% interest assured. So why call it a "Savings Fund"?
Anyways, market works in its own ways.
Mr. Chirag Mehta will be the fund manager for this Gold Savings Fund.
The Quantum Gold Savings Fund will be listed on both NSE and BSE post the NFO period.
No tax benefit will be available in Quantum Gold Savings Fund.
What are the other competitor products available in comparison to Quantum Gold Savings Fund?
The two direct competitor products already available in the market are from Reliance and Kotak. Reliance Gold Savings Fund and Quantum Gold Savings Fund-NFO - they work exactly the same way of this Quantum Gold Savings Fund, so investors might like to check them as well.
Other than that, there is a lot of choice for Gold based ETF's as there are a lot of Gold based ETF's and Gold based Mutual Funds available:
Here is the List of Gold ETF India available for trading on NSE
Recently, HDFC came out with HDFC Gold ETF: Review Analysis & Details
Then there is the Quantum Gold Fund (Gold ETF) which is from the same Quantum mutual fund house and ICICI Prudential Gold ETF, then SBI GETS-SBI Gold ETF NFO Review: SBI Gold Exchange Traded Scheme
What are the risks of investing and trading Quantum Gold Savings Fund?
Since this is directly tracking the prices of Gold in the domestic Indian market, the investor will have to take the risk of decline in the Gold prices. Dont get fooled by the word "Savings fund" as there is no assured returns. By Savings Fund, it is meant that you put your saved money in the fund, but your returns will be subject to market prices of gold which may go up or down. Although gold prices (along with silver) have been shooting up and up in the recent times, there is no guarantee that it will continue to do so in future as well.
To udnerstand this, the best way is to look for historical gold prices. If you are interested in looking at how Gold prices have performed historically, see Gold ETF: Historical Performace of Gold ETF
Another risk comes in from the tracking error. Remember, the fund manager doesn't invest all your money in gold. Only around 95% is invested in gold, while rest is kept in debt instruments and cash holding, so as to take care of creation of new units as per the demand and redemption requests. Hence, there may not be a tick by tick correlation between the Quantum Gold Savings Fund prices and the actual godl prices and hence comes the tracking error.
Final Thoughts about Quantum Gold Savings Fund?
Nothing special - this is just another gold based (savings) fund in India where already many gold etf's are existing.
Quantum Gold Savings Fund Entry Load: Nil
Quantum Gold Savings Fund Exit Load: 1.5% if exit within 1 year, NIL afterwards.
SIP or systematic investment plan is also available.
No tax benefit will be available in Quantum Gold Savings Fund
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