Gold, Gold, Gold - The world is going crazy with the Gold prices shooting up the roof with every single passing day. In India, several Gold Based products and ETF's are already available for investments and trading, yet many fund houses are coming with Gold based products to catch in this hike in gold prices. With Festive season ahead followed by marriage season, the gold demand in India is set to increase further.
The SBI Mutual Fund House is launching their SBI Gold Fund. In this article, we will analyze how good is this SBI Gold Fund NFO, whether this SBI Gold Fund offers anything new or unique for the investors and whether the investors should invest in SBI Gold Fund.
SBI Gold Fund NFO: Review Analysis & Details
Let's begin with some basic details about SBI Gold Fund.What are the NFO dates for SBI Gold Fund?
The NFO period for SBI Gold Fund is currently open (from 22 August 2011) and will close on 5 September 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 SBI Gold Fund?
Investors and traders would know that there is a Gold ETF already available in the market from SBI MF, it is SBI GETS-SBI Gold ETF . What this SBI 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 SBI GETS - the Gold ETF from SBI MF.
So, this new Gold Fund from SBI will work exactly the way the Reliance Gold Savings Fund (See Review & Details) and Kotak Gold Savings Fund works. They too pool in money from investors, and invest in their own respective Gold ETF's.
In my honest opinion, I dont see any special benefits of such Gold Funds or Gold Savings Funds - (SBI has been good atleast not to use the word SAVINGS in their product, which I was not happy about with Reliance and Kotak). My take is that it is much easier for investors to directly invest in Gold ETF's rather than going through the Fund route.
The only advantage I see here is that the minimum investment amount is Rs. 100 and no demat account is required - and this might be the USP's for these Gold Funds or Gold "Saving" Funds - their target customers are those who are not (demat) computer savvy, do not understand demat-and all and are happy with investing small sums of money through paper applications.
Although the investment objective of the SBI Gold Fund is to generate returns similar to SBI Gold ETF, I wonder what actually this fund is going to really do instead of just being a channel to route investor's money into their own Gold ETF.
What are the other competitor products available in comparison to SBI Gold Fund?
The recently lauched Reliance Gold Savings Fund (See Review & Details) is the biggest and direct competitor to SBI 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 Currently Open: Quantum Gold Fund
If you are interested in looking at how Gold prices have performed historically, see Gold ETF: Historical Performace of Gold ETF
What are the risks of investing and trading SBI Gold Fund?
By investing in such a fund, you are taking the risk on overall Gold prices. If the Gold prices start going down, so will the price of SBI GETS Gold ETF and hence this SBI Gold Fund investments will suffer.
Final Thoughts about SBI Gold Fund?
Nothing special, just another fun adding to the long list of Gold based funds already available in the Indian markets. If you are reading this article, that means you are aware about the computer and demat and things like that (no paper based application), so my advise will be to directly invest in SBI GETS ETF instead of this fund. Let the SBI Gold Fund be for those who dont want to get into the hassles of demat and such things or for those who are really looking for very small SIP investments like Rs. 100 and so on.
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 SBI Gold Fund
Mr. Raviprakash Sharma will be the fund manager for SBI Gold Fund.
Multiple options available for investments in SBI Gold Fund :
Growth Option
Dividend Option - Payout, Reinvestment facilities
SBI Gold Fund Entry Load: Nil
SBI Gold Fund Exit Load: 1% if exit within 1 year, NIL afterwards.
SIP or systematic investment plan? Yes with minimum 100 Rs. - that's what they are betting on.
Price of physical gold will be the benchmark for tracking the performance of SBI Gold Fund
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