Feb 11, 2011

Introduction of SIP in GOLD through Mutual Fund


Gold is seen as a symbol of security and a sign of prosperity. Indian consumers consider gold jewellery
as an investment and are well aware of gold’s benefits as a store of value. Gold is also recognized as a
form of money in India, a tradable liquid asset.
It is one of the foundation assets for Indian households and a means to accumulate wealth from a long
term perspective. Gold investment has been in the culture of Indian tradition and has been on rise
amongst the modern investors as well due to the financial uncertainty and inflationary pressures.

bullion1.jpgGOLD View & Outlook
Gold as an investment asset has given positive returns for each year during the last decade outpacing
most of asset classes. Gold has provided compounded annual return 17.68 % during the decade. Gold
ended the decade with a bang and moved up by 29.52 % during the year 2010 making a new high for
tenth year in a row.
The risk of sovereign default because of higher debt burden, rising fear of inflation as a result of loose
monetary and fiscal policy, uncertainties associated with global growth outlook, thrust for portfolio
diversification were few of prime drivers that help gold prices move higher. Situation remains unchanged
to a great extent and the concerns that kept gold prices at elevated levels are not yet addressed. The risk o
f sovereign debt default continues, concerns over rising inflation and weaker outlook for US dollar still
remains. Central banks, having huge Foreign exchange reserves like India and China, have only started
diversification away from US dollar and they will require huge quantum of gold for further diversification.
All these factors create a constructive environment for higher gold prices.
As per news articles physical demand in India and China remains extremely robust. As per remarks made
by the chairman of Shanghai Gold Exchange, China’s gold imports jumped 480% y-y to a record of 209.7
tons in the first 10 months of the current year. Mr. Wang Zhe, General Manager of Shanghai Gold
Exchange stated that the imports for first 11 months totaled to 247 tons from 60 tons in FY 2009. He
further added that government purchase were not behind the surge. The biggest drivers should be
jewellery demand, gold bars for investment and the year end gift-giving. Similarly, Gold imports in India,
the world’s largest gold consumer, has likely reached a record last year driven by investment demand
according to World Gold Council. As per market sources total gold imports in India amounted to around
750 tons during 2010 compared to around 557 tons of gold imports in 2009. Gold investment demand in
India surges 73 per cent in the year ended Sept, 2010.
Gold is likely to continue to benefit due to lower interest rate regime globally, higher inflation expectation,
European debts concerns and thrust for portfolio diversification. The longer term outlook for US dollar
remains bearish. On a short run dollar may benefit due to concerns over European debt. But over longer
term fundamental weakness in US economy will lead to dollar depreciation and that may benefit gold.
During the uncertain global environment gold tends to benefit due to its safe haven appeal. Volatility in
global markets is likely to go up given the current macroeconomic environment and that is supportive of
higher gold prices. The typical characteristic of a bubble in any financial markets are nowhere in sight for
gold market and hence gold prices are expected to continue to move higher. Geo political uncertainty is
the other important demand drivers for gold.
--Source: Bloomberg


In line with this growing gold investment demand combined with India’s culture for buying gold, Reliance Mutual Fund offers Reliance Gold Savings Fund that would enable investors to invest in gold – the mutual fund way.

Positioning of the Fund Reliance Gold Savings Fund, is the first gold fund of fund in the industry which opens a new avenue for investing in gold as an asset class. The fund seeks to provide returns of gold through investments in Reliance Gold Exchange Traded Fund, which in turn invest in physical gold. It enables you to reap the returns of gold in a paper form without the need of a demat account.

It is a passively managed fund which would enable an investor to save for gold in a convenient manner either through lump sum investment or through systematic investment - the mutual fund way from a long term perspective. It aims to give investors the opportunity to participate in the bullion market in a relatively cost effective and convenient way as you can directly purchase and sell the units at the AMC.

Investment PhilosophyA modern way of accumulating “Gold” the mutual fund way. An investment opportunity which enables an investor to allocate gold a foundation asset to his portfolio in a systematic way. This fund would enable you to add the yellow metal which is considered as a safe haven, hedge to inflation and diversify your portfolio in a convenient way.

  • Passively managed Fund of Fund investing in Open-ended Reliance Gold Exchange Traded fund
  • Invests exclusively in Reliance Gold Exchange Traded Fund which in turn invests in physical gold which shall be of fineness( or purity) of 995 parts per 1000 ( 99.5 % ) or higher
  • Portfolio focused on providing returns that closely correspond to the returns provided by Reliance Gold Exchange Traded Fund
topband-ourschemes.gif 
Benefits of Investing in Reliance Gold Savings Fund
Open door for non - demat a/c holders: Investors can invest in this fund through the physical mode across the country thereby making it easily available and convenient for non demat a/c holders"

Systematic Investment Plan (SIP): a long term disciplined investment technique under which you invest a fixed sum of money on a monthly or quarterly basis in a scheme at the prevailing NAV. This allows you to save and invest regularly while you are earning.

This investment technique enables you the following benefits:
 
  • Small, regular investments: A simple way to enter the market by investing small amounts. Small but regular investments go a long way in creating wealth over time
  • Rupee cost averaging: Fewer units during rising markets and more units during falling markets, thereby reduces the average cost per unit
  • No need for ‘timing the markets’: No need to select the right time and quantity to buy and sell as timing the market is time consuming and risky. It eliminates the need to actively track the markets.
Availability of add-on facilities: Ease of availing add on facilities like Systematic Transfer Plan/ Systematic Withdrawal Plan / Systematic Investment Plan/ auto switch /trigger facility etc.

Liquidity: An investor of Reliance Gold Savings Fund can subscribe and redeem units on all business days directly from the AMC, while purchase and sale of gold ETF units is a factor of liquidity on the exchange.

Ease of investing: Investing in gold through Reliance Gold Savings Fund, the investor can directly subscribe/ redeem units through the physical mode at the various designated investor service centre across the country thereby making it easily accessible and convenient.

Cost Effective: Investing in gold through the Reliance gold Savings Fund in physical application mode enables you invest in a low cost manner as the investor does not have to incur charges like annual maintenance charges for demat account , delivery brokerages charges, transaction charges incurred for investing through the dematerialized mode.

The investors will be bearing the recurring expenses of the scheme, in addition to the expenses of underlying Scheme.

Taxation: Investments in Reliance Gold savings Fund enables you to claim for long term capital gains tax after a period of one year of investments, whereas for physical long term taxation is available after 3 years.

The tax benefits are as per the current Income Tax laws & rules and any other law for the time being in force. Please refer to Statement of Additional Information for more details. Readers are advised to seek independent professional advice and consult their tax advisors and arrive at an informed investment decision before making any investments.
Systematic Investing in Gold- An edge to accumulating wealth Reliance Gold Savings Fund endeavors to inculcate a regular saving habit to your investments in gold through systematic investment plan. It provides an easy and a convenient way to reap the returns of gold through regular and small amount investment.
SIP Return as on Dec 30, 2010
Period
1 Year
3 Years
5 Years
10 Years
SIP Start Date
04/01/2010
02/01/2008
03/01/2006
02/01/2001
Gold Price (Rs/Gm) (As on 30/12/2010)
2031.42
2031.42
2031.42
2031.42
Total No. of gms accumulated
34
124
258
839
Total Amount Invested in Rs.
60000
180000
300000
600000
Market Value if invested in Gold in Rs.
68590.34
252253.81
523837.89
1703880.5
Return on SIP in Gold
27.92%
23.28%
22.51%
20.16%

Past Performance may or may not be sustained in future.

Assumptions - Returns on SIP of Gold are annualized and cumulative investment return for cash flows resulting out of uniform and regular monthly subscriptions have been worked out on “Excel” spreadsheet function known as XIRR. It is assumed that a SIP of Rs. 5000/- each executed on 2nd of every month has been taken into consideration including the first installment.

To Start Investing in GOLD or SIP , Call: 0-991-000-9312 | Email: info@safeinvestindia.com
Disclaimers - The amounts invested in SIP and the market values of such investments at respective periodic intervals thereof are simulated for illustrative purposes for understanding the concept of SIP. This illustration should not be construed as a promise, guarantee on or a forecast of any minimum returns. The Mutual Fund or the Investment Manager does not assure any safeguard of capital and the illustrated returns are not necessarily indicative of future results and may not necessarily provide a basis for comparison with other investments. SIP does not guarantee or assure any protection against losses in declining market conditions.

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