Gold, a symbol of wealth in Indian households has witnessed a large stable demand over the years. The yellow metal provides an array of benefits to the investors: stability to the investment portfolio, a hedge against uncertainties and Inflation and as an avenue for long term returns on investment.
Gold, in the last decade has given a CAGR of 18.69% till July 2012 in INR terms. The yellow metal has shown a low correlation with other asset classes while at the same time its returns potential has been similar to equity. With liquidity and economic concerns looming in both the European Union and the US, gold has a potential of making new highs.
In the past we have seen that whenever the US Dollar is under pressure, investors have flocked towards gold as a safe haven. The same was seen in the two rounds of Quantitative Easing (QE1 & QE2) adopted by the US Fed. If the same pattern continues, we could witness the gold bull rally continuing and touching new highs.
Therefore, investors can now look at investing in gold units through Systematic Investment Plan (SIP) in gold funds without holding a demat account. Gold funds provide investors a comfortable, hassle free option to invest in gold in even smaller amounts.
IDBI Mutual Fund now offers investors the option to invest in gold with their newly launched IDBI Gold Fund. The investment objective of the scheme is to generate returns that correspond closely to the returns generated by IDBI Gold Exchange Traded Fund (IDBI Gold ETF). The benchmark index for the fund is the domestic price of gold. The NFO was from July 25 to Aug. 08, 2012 and the fund re-opened for continuous sale and repurchase from Aug. 23, 2012.
The fund uses the collections to invest in IDBI Gold ETF units, which in turn buys physical gold of 99.5% purity (24 carat approx). It is an ideal investment for those who wish to build up their gold portfolio and hold gold as an asset class in their investment portfolio. Besides this, investors who do not want to go through the nuances of operating a broking account and holding a demat account, but wish to start a SIP in gold could look at this mode of buying gold.
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