HDFC Gold Fund NFO: Review Analysis & Details

Details about HDFC Gold Fund: Review, Analysis, Details & Investment Opinion.
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 & Details

Let'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

Real Estate Market Effect on Country's Economy

Detais about How real estate market can cause a blow to the Indian Economy
We've seen subprime in US, we've seen similar problems in European Countries, and the very latest at home, State Bank of India was downgraded by one of the rating agencies in a reported stress test because of its NPA's (Non Performing Assets) which are suspected to increase from the present 3.4% to a high of 12%, in case of a stress test situation as reported by CNBC news channel.
Still, we all sit with a belief that nothing will go wrong in India. India offers cheap labour options from unskilled streams to highly skilled IT streams so outsourcing will never stop to India. So it is OK to take loans for house, cars, etc. and live peacefully under the assumption that job will stay, economy is tightly controlled by government so nothing will go wrong.

However, one simple issue takes no time to become a nation-wide problem. Let's see how the real estate market of India (sometimes called over-regulated, sometimes uner-regulated) can cause problems to the economy.
First, is the real estate sector over-regulated as quoted by many builders? The answer is yes, but this yes is limited to only getting various permissions from multiple authorities to get into and continue the real estate business.
Is it under-regulated? Again, Yes (in fact a big YES), because there is absolutely no control on prices quoted or randomly raised by the builders. Take this example, a friend of mine in Pune has been looking around for a 2 BHK apartment since last 7-8 months. In an area like Balewadi which is like the western outskirts of Pune with no proper infrastructure, the prices have risen from a low of 3700 to 4500 in a matter of 7 months.
Who controls these prices and what regulation we have there? Absolutely nothing.

So, the rates keep going north, for few months, few years. Everyone believes its all looking good and assumes that it will all remain good, so people take loans. Not just the private banks, even government banks are willingly offering loans freely. No one ever dares or takes any effort in questioning the rationale behind the high property prices. Builders want high price, Banks want high interest high amount loans, and who is left at the other end - its you and me, the common man - highly talented, service class, worked hard for studies, now toiling hard in the MNC job, and will continue doing the same to repay the EMI's for the rest of his life for his dream house or dream car.

And this is where the problem lies - Since no one questions why there has been a steep price rise, say from 3700 to 4500 in a matter of 6-8 months, and banks keep awarding loans, it might turn out to be a problematic situation for the bank.

Assume this - X started looking for a home 8 months back when the rates quoted were 3700. He thought its high, so he waited and explored more. However, instead of rates coming down, they sky rocketed, for no reason, to 4500. After toiling hard in search of home, X finally gives in and books an under-construction flat at high cost of 4500, whose possession is promised to be in 2 years time. So his Home Loan EMI's start. Since the flat is not ready, he is paying rent also. It's hitting him double hard, and this will continue for atleast 2 years till he gets possession of his own flat when he can start saving the rent.
Now comes the problem - The builder has constructed all the 12 floors of the building in 1 years time. X is happy seeing this progress - he is even assuming that since all 12 floors are ready in just 1 year, he might get possession early. However, even then there is a lot of work left in the building. Water connection, Electrical wiring, Electrical supply, Gas supply, plaster work, windows, etc. etc. etc.. The bad part - the builder might even stop the work because of his own reasons or delay it further.
And then comes the worst part - there is a downturn in global economy. X looses his MNC job or his salary is reduced. However, his EMI's are continuing and so is his rent because his flat is not yet ready. After remaining jobless for 6 months, X cannot afford anymore payments anymore and decides to give up. He moves back to his native town/village foregoing whatever he paid as pre-EMI's and downpayments. Now, the bank is left with a property which is under-construction. Since X is no longer in scene, it now taken over by the bank (an under-construction property). It is now the bank which is going to take the hit because it is the one which has given the loan money. X is out with his foreclosure, Bank is now liable. All that the bank is left with is a not-ready property on paper which it has the right to sell.
But where can it find buyers? When there is global economic problems, there are lots of layoffs, high interest rates, then there are no buyers. And note that it is an under construction property. Who would buy an under-construction property from a bank in such a time? Ultimately, the banks take the hit.

Another scenario - X does not loose his job but interest rates keep rising. X took home loan at interest rate of 8% and now it is at 12%. It has caused a big rise in EMI for X. X may not be able to afford it and the bank is not willing to increase his lona tenure considering his age. So ultimately, X may default. It's again the bank which is left with such a property which may not have much value.

To see more on Home Loan related Tax Benefits, please check Home Loan Tax Benefits and All Home Loan Articles

It is these kind of global/local scenarios which lead to a complete and big set of problems for the banks. As long as there is no one to question the random real estate price hikes, as long as the banks (both private and government) freely lend out loans to individuals without considering the actual price worth of the mortgaged property, these problems will continue. The home loan provider banks simply pass on the liability to the individuals. All that is based upon the understanding and assumption that individual will be able to keep on bearing the cost of high interest rates, longer loan durations and higher EMI payments.
Unless there is some proper regulation in place to check the menace of abrupt and high cost prices quoted by builder lobby, the risk of real estate on national economy will always remain

Axis Gold Fund NFO: Review Analysis & Details

Details about Axis Gold Fund: Review, Analysis, Details & Investment Opinion.
Another renowned mutual fund house, Axis 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 Axis Gold Fund

The Axis Mutual Fund House is launching their Axis Gold Fund. In this article, we will analyze how good is this Axis Gold Fund NFO, whether this Axis Gold Fund offers anything new or unique for the investors and whether the investors should invest in Axis Gold Fund.

Axis Gold Fund NFO: Review Analysis & Details

Let's begin with some basic details about Axis Gold Fund.
What are the NFO dates for Axis Gold Fund?
The NFO period for Axis Gold Fund is from 30 September and will close on 14 October 2011. After the NFO period, the regular buying and redemption of fund units will start, on date 28th October 2011.

What is so unique about this Axis Gold Fund?
Investors should undestand this very clearly that 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 Axis Gold ETF or Exchange Traded Fund. It is this ETF which will actually invest in physical gold.
What this Axis Gold Fund will do is collect money from investors (either one time or multiple times through SIP or Systematic Investment Plan) and invest that money in Axis Gold Exchange Traded Fund - the Gold ETF from Axis MF.
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 Axis Gold Fund requires minimum 1000 Rs. investment, other Gold Funds need only Rs. 100). They do not require demat account, etc.
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 Axis Gold Fund?
The recently lauched ICICI Gold Savings Fund, SBI Gold Fund and Reliance Gold Savings Fund (See Review & Details) are the biggest and direct competitor to Axis Gold Fund - the two products from Kotak and Reliance Fund houses work in almost the same way.
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

Recently, HDFC came out with HDFC Gold ETF NFO: Review Analysis & Details

Then there is the good old Quantum Gold Fund (Gold ETF)

and ICICI Prudential Gold ETF, then SBI GETS-SBI Gold ETF NFO Review: SBI Gold Exchange Traded Scheme

Other Gold Schemes: Quantum Gold Fund

What are the risks of investing and trading Axis Gold Fund?
The benchmark for Axis 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 Axis 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 Axis 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 Axis Gold Fund

Mr. Anurag Mittal will be the fund manager for Axis Gold Fund.

Multiple options available for investments in Axis Gold Fund :
Growth Option
Dividend Option - Payout, Reinvestment facilities

Axis Gold Fund Entry Load: Nil
Axis Gold Fund Exit Load: 1% if exit within 1 year
NIL beyond 1 year.
SIP or systematic investment plan? Yes.
Minimum SIP is Rs. 1,000 and in multiples of Re. 1 per month. However, a minimum SIP of 36 months or 3 years is required.

Domestic Price of Gold will be the benchmark for tracking the performance of Axis Gold Fund

DSP BlackRock World Agriculture Fund NFO: Review Analysis & Details

Details about DSP BlackRock World Agriculture Fund: Review, Analysis, Details & Investment Opinion.
Another renowned mutual fund house, DSP BlackRock, has come out with a new fund offer or NFO, for its newly launched fund called DSP BlackRock World Agriculture Fund

The DSP BlackRock Mutual Fund House is launching their DSP BlackRock World Agriculture Fund. In this article, we will analyze how good is this DSP BlackRock World Agriculture Fund NFO, whether this DSP BlackRock World Agriculture Fund offers anything new or unique for the investors and whether the investors should invest in DSP BlackRock World Agriculture Fund.

DSP BlackRock World Agriculture Fund NFO: Review Analysis & Details

Let's begin with some basic details about DSP BlackRock World Agriculture Fund.
What are the NFO dates for DSP BlackRock World Agriculture Fund?
The NFO period for DSP BlackRock World Agriculture Fund is from 30 September and will close on 14 October 2011. After the NFO period, the regular buying and redemption of fund units will start, but the precise date is not known.

What is so unique about this DSP BlackRock World Agriculture Fund?
Investors should undestand this very clearly that this is actually a Fund of Funds (What's this?). What it means is that this fund will not invest in any companies or stocks diectly, instead it will invest in other fund, Called BlackRock Global Funds-World Agriculture Fund. It is this fund which will invest in stocks/companies in the agriculture sector at a global level.
A related NFO for a Fund of Funds is offered by DSP Merrill Lynch but it is in the energy sector. It is DSP BlackRock World Energy Fund. Another example is Blackrock Absolute Return Strategies Fund

So investors should be aware that they are actually putting their money into the Global Agri fund and that exposes them to the forex currency risk. What if the return of the BlackRock Global Funds-World Agriculture Fund is 25%, but because of currency fluctuations, the net returns you receive comes down to just 12%.
The main idea behind investing in agricultural sector through this fund is that there is imbalance between food supply and demand. And being a basic need, there is a lot of good return opportunity by investing in agriculture sector. All these assumptions are based upon increasing world population needing more food, thereby making good profitable opportunitites for agriculture based businesses and hence the companies in the agri sector which this fund will choose to invest. Ultimately, its the skills of the fund managers to pick the right company for better returns.

What are the other competitor products available in comparison to DSP BlackRock World Agriculture Fund?
There are no agriculture fund details available with FT Times as of now, but there are other commodity funds which may provide some exposure to agri sector in India like Mirae Asset Global Commodity Stock Fund or SBI Magnum COMMA Fund

What are the risks of investing and trading DSP BlackRock World Agriculture Fund?
The benchmark for DSP BlackRock World Agriculture Fund Fund is the DAX Global Agribusiness Index. By investing in such a fund, you are taking the risk on forex as explained above.
Also being fund of funds, If the returns from the end fund fluctuates, so will the returns generated from this fund will keep fluctuating in either direction.

Final Thoughts about DSP BlackRock World Agriculture Fund?
Another fund of fund which is focussed on the Agriculture sector. A good option for investors who believe that this fund of funds will enable them to get good returns besides the forex risk and global exposure risk.
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 DSP BlackRock World Agriculture Fund

Mr. Mehul Jani will be the fund manager for DSP BlackRock World Agriculture Fund.

Multiple options available for investments in DSP BlackRock World Agriculture Fund :
Growth Option
Dividend Option - Payout, Reinvestment facilities

DSP BlackRock World Agriculture Fund Entry Load: Nil
DSP BlackRock World Agriculture Fund Exit Load: 1% if exit within 1 year
NIL beyond 1 year.
SIP or systematic investment plan? No specific details available

DAX Global Agribusiness Index will be the benchmark for tracking the performance of DSP BlackRock World Agriculture Fund