Menu

Investor Forum

Equity Right

What are Gold funds and what are the benefits?

What are Gold Funds and what are its benefits?

 

Gold funds are unique type of mutual funds, through which investors can invest directly or indirectly in Gold Reserves. They can invest in the gold producing stocks, mining company stocks or in physical gold. Gold funds are the most convenient asset to invest, without the risk of theft or paper work as they are in digital form. This fund is kind of an open ended investment, where investor can issue or redeem at any point of time based on the units which they hold. However, their price directly depends on the metal (gold). Some investors use gold funds to hedge and diversify their portfolio and protect against uncertain economic condition. Many investors diversify around 10 to 20 percent of their portfolio by investing in gold funds. Golds funds are regulated by the SEBI and it is ideal for investors who are risk averse.

 

Types of gold funds available across globe for investors:

Gold Mining Funds:

In this, funds are invested in stocks of the mining companies and returns depends on the performance of these stocks. However, investment does not get affected due to any fluctuation in economy as gold price is affected mainly due to the fluctuation in demand and supply of gold. Gold exchange traded funds were first introduced by Benchmark Asset Company in India. This funds basically invest in the gold through Demat account. Returns and value of the investments totally depend on the price of gold. Investment in Gold Fund of Fund is same as exchange traded funds as in this, investments are made in particular unit of the Exchange traded funds without opening the Demat account.

 

Main purpose of Gold Funds:

Main purpose for investors to invest in gold funds is to grow their investment value and create wealth in whatever period the investment is made with protection against the market fluctuation. Price of Underlying asset varies according to change in demand of gold and at the time of maturity returns are calculated on current gold price. If gold price is increased, it gives more returns at the time of redemption.

 

What are tax charges for Gold Funds?

Normally, the tax which is charged on the Gold Jewellery is applicable to the Gold Mutual Funds schemes. But, taxes also vary according to the tenure. If investments are made for less than three years than revenue is added to the total gross income and considered as short term. But if investments are made for more than three years than 20 percent tax is applicable with indexation norms and CESS charges. However, if capital gains is through exchange traded funds (Gold ETFs), tax exempt is given. No TDS is applicable to Golds Mutual funds. During the time of buying or selling of funds, same tax is applicable as on Gold Jewellery.

 

Benefits of Gold Funds:

Flexibility in investment:

Gold funds allows investors to invest according to their convenience, comparing to the physical purchase of the gold. Investment can be made as low as Rs 500 and even small income class can also invest in this fund rather than purchasing physical gold which costs higher than these funds and gives flexibility. Gold mutual funds are one of the safest investment as these funds are regulated by Security exchange board of India and they continuously monitors the performance of this type of funds so that investors can analyse their future returns. Gold Funds are also safer than holding physical assets (Gold) as it is in de-materialized form.

 

Highly liquid:

Gold funds are high liquid funds as investors can redeem them in short term and are also protected against the uncertain economic situation. However, during market hours only, it can be buy or sell and net asset value of previous day is considered at the time of selling and trade is offset in one or two working day. To balance the overall portfolio, investor may always choose gold funds. Gold price is not directly affected to one investor’s overall investment and stocks in which investment is made. Gold fund is considered as one of the safest investment with good returns.

 

Some finest Gold Mutual Funds in India:

Axis Gold Funds has given return in a year up to 26% and for 3 to 5 year period 4%.
SBI Funds has given returns up to 22% in a year and 6% in 5 years.
HDFC Gold Fund has given returns of 22% in a year and 6% in 5 year period.

 

 

 

Equity Right

Importance of Financial Literacy. Why it is a must have today

Importance of Financial Literacy.

 

One of the main concern is Financial literacy in this present situation, as it is directly affects the country’s economic development. India stands way behind in financial literacy level comparing to other countries. As per the media reports, India accounts for nearly 20% of the world’s population, but 76% of India’s adult population is not even mindful of the simple financial theories. It discloses that financial literacy is very low in India vs. the rest of the world.

 

Financial literacy, like other developed nations, has still not been a priority in India. The lack of basic financial knowledge contributes to deprived investment and decision-making. Thus a maximum of Indian people invest in plans which have short maturity and physical assets to achieve their personal goals, which offer fewer benefits and do not contribute to the country’s economic growth.

 

As per the media reports, nearly 76% of Indian adults do not grasp the fundamental financial principles and are thus financially illiterate. The studies suggest that India always had a low rate of financial literacy relative to the rest of the world. In fact, we are still far behind other countries and now is the time for developing countries like India to realize the value of financial literacy.

 

Why it is Important?

It is important because it will help us to know how money is to be invested and handled and how it can be used in ways that makes a person financially more secure in the future.

Justification for its importance is as follows:

 

Value of money:

Firstly, it is very imperative for all of us to know the value of money. This will help us to handle our finances efficiently. Financial literacy will teach us the importance of saving and appropriately budgeting the funds. We should not waste our money on unnecessary and expensive products. We can understand better, the difference between our wishes and needs and we should prioritize things in our daily lives according to our quintessence.

 

Keep the Debt in Control:

Being financially literate will help us to have a proper check-in our debt. Too much debt will make us profoundly troubled. If we are financially competent, we can decide how debt can be afforded and will be able to pay off timely, especially if we have mortgage and insurance bills. This will teach us to plan for the education and future needs of our children as well as medical and hospital expenses without the need to lend money.

 

Imparting financial Knowledge among Youngsters:

Being financially aware will enable us to protect the future of the coming generation. We should teach them how to make budgets and save for years to come. They will also understand how their parents work hard to fulfill all their needs, even at their young age. In making them understand the importance of financial literacy, responsibility and reverence for their parents will also be taught. This will also help them realize that they will be financially secure as soon as they age. Imparting financial knowledge will help them to be more responsible and street-smart.

 

To be ready for any kind of uncertainties and to add other income streams:

We face emergencies that need cash, or resources to sustain or overcome our financial and emotional crises. In times like these, being financially educated saves us the trouble of borrowing money, which only brings us more problems. Financial literacy will benefit us to invest in stocks and develop more income sources besides our salaries. The creation of multiple revenue streams gives us the buoyancy that financial crises can survive.

 

Assistance in old-age:

If you are financially literate at a young age, you will be stress-free for the rest of the life, as all the provisions to secure the future would be initiated earlier itself. An appropriate retirement and pension plan at the age to 30 will be rewarding for an entire life.

 

Works as a helping hand:

If we spend a certain amount of money for instance we invest in stocks, we assist the company’s business to expand. This will generate more jobs and will help the company to generate more profits. This results in improving jobs and helps to create a more progressive nation. Being financially stable gives us the opportunity to share our blessings with the poor. Helping others brings us an overwhelming feeling of fulfillment.

 

 

How co-working spaces can restart post lock down.

Equity Right

Credit risk funds. Should you invest?

Credit risk funds. Should you invest?

Credit risk funds are debt funds that lend not less than 65% of their portfolio in the lower rated instruments (less than AA rated papers). The borrowers have to shell out higher interest charges to compensate for their lower credit rating, which translates into a higher risk for the lender due to an increased possibility of default. Although, these funds lend mostly for short duration. They are still one of the riskiest in the category.

These funds are ideal for an investment horizon of at least 3-5 years. There is a high probability of incurring losses if held for short term.These funds tend to deliver higher returns than Bank Fixed Deposits thereby involving higher risk.

 

Portfolio with Credit Risk Funds fetches:

Higher Return : These funds take high risks and invest that money in the low risk instruments and the returns generated are higher as compared to other funds.

Tax Benefits: These funds are tax-efficient as the Long Term Capital Gains (LTCG) is flat 20% where as if the assessee is in 30% slab still LTCG will be taxable at 20%.

Extended Supervision: In these funds, fund managers play a very significant role in obtaining remarkable returns. Credit rating alone is not the only basis of decision making. There are various parameters such as the company’s scope of expansion, its potential and business model.

For instance,

ICICI Prudential Credit Risk Fund is presently giving return of +8.64% p.a.

Kotak Credit Risk Fund is presently giving return of +7.44% p.a

HDFC Credit Risk Fund is presently giving return of +7.55% p.a

 

 

Debt, hybrid mutual funds see large outflows in April

Equity Right

Hindalco concludes buying Aleris

Hindalco completes Aleris buy through its subsidiary The flagship company of the Aditya Birla Group, Hindalco through it's subsidiary Novelis has completed the buyout of Aleris Corp. The buyout was...
Equity Right

China’s Central Bank now owns 1.01% in HDFC

China’s Central Bank now owns 1.01% in HDFC   The People’s Bank of China (PBOC) has raised it's stake in India’s leading mortgage lender HDFC to 1.01%. The Chinese Central...
Equity Right

What are AT1 bonds? How do AT1 bonds work

AT1 bonds and how do they work? AT1 Bonds Additional Tier 1 bonds or Contingent Convertible bonds are tradable securities issued by banks with a regular coupon payment. This bond...
Five lesser known investment options

Five lesser known investment options

Financial plan must be in such a way that the immediate and long-term financial needs are met. Investment planning is a key component of financial planning. Investments will ensure wealth...
Steps To Start Investing Safely

Steps To Start Investing Safely

Investing, simply putting in short terms means allocating the funds in excess to generate income. It is through various avenues like stocks, bonds, mutual funds or in real estate etc....
How to choose a financial advisor?

How to choose a financial advisor?

First, why need a financial advisor? So, you make money, you spend some out of that and finally you save some out of it. You may know the basic of...
Equty Rght

Catastrophe bonds. Why you should look at this as an alternate investment

A catastrophe bond(CAT Bond) is a financial instrument which insures the insurer in cases of natural disasters. These events include tsunamis or earthquakes. The loss is transferred to the investors...