UTI Mutual Fundâ€™s (MFâ€™s) Swatantra caravans are continuing on their investor education and financial literacy initiative across India.
Online PR News – 04-August-2012 – Delhi – Last fortnight, they visited Jamshedpur in Jharkhand, Davanagere in Karnataka, and Bhopal and Raebareli in central India, among others.
Coinciding with this initiative, magazine partner Outlook Money has been imparting knowledge on the various aspects of mutual funds. In this issue, we discuss gold exchange-traded funds (ETFs).
Owning gold is still today seen as a sign of being wealthy. But more than that, it is a highly-effective portfolio diversifier due to its low to negative correlation with all major asset classes. As such, putting 5-10 per cent of investible surplus in gold is advisable. In recent times, gold has delivered higher returns than many other asset classes. Gold ETFs make gold investments less costly, more transparent and safe compared with coins, bars or jewellery.
What are gold ETFs? These are essentially funds that are listed and traded on the stock exchanges on a real-time basis and at a lower cost than many other forms of investing. Unlike jewellery, where the initial charges may be around 25 per cent of the gold price, gold ETFs would cost you around 1 per cent of the value of physical gold. In other words, itâ€™s like a mutual fund that you can buy and sell real-time at a price that changes throughout the day.
Why buy. They offer investors an innovative, cost-efficient and secure way to participate in the bullion market without taking physical delivery of gold. Through a gold ETF, smaller amounts can be invested to accumulate gold at different price levels with relative ease and comfort. Besides they offer stability, reduced volatility and inflation-plus returns. The investment objective of a gold ETF is to provide returns that before expenses closely correspond to the returns provided by the domestic price of gold through physical gold.
Tax status. Investments in gold ETFs are taxed like debt funds. Withdrawals before a year will be taxed at the respective income tax rates and withdrawals after a year will attract long-term capital gains tax of 11.33 per cent (including surcharges and cess).
How to buy. Gold ETFs do not allow systematic investment plans (SIPs), so purchase units at regular intervals yourself. You donâ€™t need to fill a separate form. Your online broking account will help you buy gold ETF schemes. You can even sell gold ETFs online. But avoid speculation buying if you are a long-term investor.
For more information about about outlookmoney, visit: http://outlookmoney.com/FinancialPlanning.aspx
Ashwini Kumar Sharma
The Outlook Group
AB-10 Safdarjung Enclave
New Delhi 110029.