Mutual Funds
Reliance Gold Savings Fund has a strange target group

It is expensive and aimed at risk-averse investors, but would they know the risks inherent in buying gold as investment?

Reliance Gold Savings Fund opens up a new avenue for investing in gold. The Fund seeks to provide returns that closely correspond to returns provided by Reliance Gold Exchange Traded Fund (RGETF) which in turn invests in physical gold. It will essentially invest in Reliance Gold ETF but unlike buyers of gold ETFs, you don't need to have a demat account to buy it. It will provide returns of gold in paper form. The scheme's performance will be benchmarked against the price of physical gold.

What Reliance has essentially done is converted an ETF into a mutual fund product. This means Reliance can also offer it as a Systematic Investment Plan (SIP).

Reliance Gold Savings Fund is pitched as a good option for small investors who want to invest in gold. It has opened the doors for non-demat account holders as it provides the facility to invest through the online medium and through the physical application mode. Those who were not able to invest in gold ETFs since they did not have a demat account can now participate by investing in this Fund.

However, the issue is whether the product is truly beneficial for those whom it is meant for. The gold fund is aimed at those who do not even have a demat account.

Clearly, those who do not even have a demat account don't even know about the risks of equity or are risk-averse enough not to dabble in equity shares. Most investors like them have preferred a safe investment, such as fixed deposits.

When they invest in the Reliance gold mutual fund, would they be aware of the risks of investing in gold?

The price of gold has gone up six times in the last 10 years. Any asset that has gone up so much for so long a time carries a huge risk of a crash. How will a risk-averse investor react to an asset that can crash by 50-60% within a few months?

A second issue with the Fund is its cost structure. Entry load is nil and exit load is 2% if exited within one year; nil after one year. However, since this is a fund of fund (FOF) scheme, there might be ETF expense charges that one needs to pay. As per SEBI guidelines, a fund of fund can either charge 0.75% of total expenses or it can charge a maximum of 2.5% of total expenses including the weighted average total expenses of its underlying schemes, and not more than 0.75% as management fee from FOF investors. Though Reliance gold savings fund will charge 0.75% annually, it will cap the overall cost (FOF + ETF charges) at 1.5%.

Even then, a 1.5% cost is not insignificant.

User

COMMENTS

Srikanth Matrubai

5 years ago

Gold recent sharp rise will see it going periodic price correction which will help SIP investors average their cost.

For someone, who has no exposure to Gold at all, this Fund is an excellent way to get an exposure and set his Asset Allocation right.

Arun Ghosh

6 years ago

i want to buy some ornaments for marriage purpose so i want to know have any monthly scheme with u. please let me know the datails.

Shakti Srivastava

6 years ago

HI,

Nice article. Good Information!!! I have a question...Can we convert these fund money into Gold anytime...
Or can we convert atleast into Gpld ETFs...I am new to all these...BUT can you please answer this question...

Thanks,
Shakti

REPLY

Bharat Solanki

In Reply to Shakti Srivastava 6 years ago

may be possible at the time of redemption in near future or next 10/15 year online transaction in india......?

bhaskar

In Reply to Shakti Srivastava 6 years ago

you will get the value of the gold not physical gold,which can be utilized to buy physical gold.your money will increase/decrease in proportion to the value of gold (minus/plus tracking error if any)

bhaskar

6 years ago

do you think that broking houses have been able to provide services in class3 or 4 cities and towns even villages.they are more interested to remain in metros,like private banks and insurers.so, do you think that the people from these places be deprived of getting invested in other opportunities than sbi,post fds' and lics'.mutual fund really opens these avenues for a common man.this is an opportunity for a common man to get invested in gold and that too in SIP mode. how many people here have commented are not from metros?

Paresh

6 years ago

Its really interesting that many of readers are participating in this discussion.

One reader says Paresh is mouthpiece of Reliance and its only his sales pitch..
I will be happy if he criticised Thought to Thought way,,just rather pointing towards my role as distributor.

One person shows the calculation..of Fund Vs.ETFs..If we visit the website or blog of any CFPs,its have atleast one article suggesting POWER OF SIP..i wonder where this power disappears when things comes to Gold.

Some one suggests the other better options like Tanishq Gold scheme..
but ignoring its disadvangaes of unregulation and non-transparancy..We are at least promting the product which is transparant and regulated...

One suggest to buy Gold through ETFs but do we have market expertise to do so??How many retail traders have investment attitude while share trading ?

While distributing this priduct,i come across one person..Its not I ,but he explained me how he can become rich earlier by trading Gold at MCX and how his broker gives 5 times margin leverage...I compliment him for his trading at MCX with so much high leveraged positions but really thinking of the RISK.

One compares the situation of in 1980 to today..In 1980,,Silver was the frontrunner and major stake holder was Lehemen Brothers,,They buy in very aggressive way,,,when comex intervened the manipulation Prices crashed from $52...But when this time silver berakoutts from $17,rather than one handed buying,,collective actions have seen,,even a smaller hedge funds have participiated in investment...
so its difficult to tell anyone whether there will be crash ahead or Its initiation of Next decade rally after underperformance in the period of 1982-2000...So only option is to remain invested,,and what these kind of funds offer to you...

thank you.

REPLY

mcxtrader

In Reply to Paresh 6 years ago

I like transparancy that mutual fund offers..
so i have started SIP in this fund...
Lets see the results after 1-2 yrs..and can be latter reviewed..

anitachaudhary

6 years ago

iam a house wife i want to invest this scheme but i dont no how can i am invest it do please guide me

REPLY

Keshav B Bhat

In Reply to anitachaudhary 6 years ago

Dear Ms Anitajee,<br /> Kindly note that there are enough diversified equity funds in the market to invest. Go in to SIP or STP route you will be able to get decent returns. I advise to avoid Fund Of Funds as the retuns are taxable and you will be in to tax complications later on also the retuns can not be at par with good diversified equity funds Regards, Keshav B Bhat

Bharat Solanki

6 years ago

क्या आपको मालूम हैं पिछले दस बीस साल में आपने जो दागिना जोहरी से बनवाया या ख़रीदा हैं उसमे शुद्धता कितने प्रतिशत हैं अगर आप इसकी जाँच करवाए तो मुश्किल से पच्चास से साठ टक्का और यह भी हो सकता हैं कि इसमे पच्चास प्रतिशत से भी कम शुद्ध सोना हो !
आपकी जानकारी के लिए आपको बता दे कि आज से दस साल पहले जिस दुकानदार के पास आधा किलो अथवा एक किलो सोना स्टोक हुआ करता था आज उन्ही दुकानदारो के पास कितना सोना दुकान में स्टोक रहता हैं करीब दस किलो से भी अधिक |
यह दस किलो सोना उन दुकानदारो के पास आया कंहा से, आपके खून पसीने की मेहनत की कमाई से आपके द्वारा बनवाये जेवेलरी में तांबा-पीतल मीलाकर | आपने यह सोचकर दागिना बनवाया की मुशीबत के वक्त दागिना बेचकर घर की जरुरत को पूरा किया जा सके लेकिन क्या आपके घर की जरूरते पुरी हुई ? नहीं ! हाँ उन दागिनो को गिरवी रख दुकानदारो को ब्याज देकर रही सही कसर भी जरुर पुरी कर दी | इस तरह दुकानदार तो मालामाल होते गये पर आपकी स्थिति वही की वही रह गई | आज दस किलो शुद्ध सोने की कुल कीमत दो करोड़ से भी अधिक होती हैं क्या कोई ग्राहक हुआ दस किलो सोने का करोडपति मालिक ? नहीं | हाँ दुकानदार जरुर करोडपति हो गये, होने चाहिए थे कौन ग्राहक लेकिन बेचारा ग्राहक ठगा गया |
जागो ग्राहक जागो समय रहते जाग जाओ नहीं तो अगले दस बीस साल में भी यही होता रहेगा............

Indrejeet

6 years ago

Good to see the nice debates here.

Investor should take independant decisions taking view of both sides.
Do not ignore paresh's points just because he is distributor...also taking account of article view..

mcx analyst

6 years ago

I Think people do not understand the difference bet. stocks and commodities.
Remember commodities have natural occurance only.One reader mentions some name of stocks..Pl. do not compare any commo. with stock..Finally commodities are unique..

Pankaaj Maalde

6 years ago

This fund will badly hit to all investors in three cases,

1) Investment is of higher value
2) Return will be high say 15% to 20%
3) Time horizon is 5 years and more.

Take an example of an investor who wants to invest 10 lacs. in Gold ETF's his broker charges him 0.25% brokerage. his net investment in GOLD ETFs will be 9,97,500.

His fund value after 5 years/10 years will be :

1) @ 10% return 16,02,468/25,80,790
2) @ 15% return 20,01,313/40,25,354
3) @ 20% return 24,75,894/61,60,816

And suppose he invests in Gold Fund where charges are 0.50% higher than ETFs. His fund value after 5 & 10 years will be

1) @9.50% return 15,74,238/24,78,227
2) @14.50%return19,68,010/38,73,065
3) @19.50%return24,36,910/59,38,531

The difference will be Rs. 28230, Rs. 33303 & Rs. 38,984 in 5 years.

in 10 years difference will be Rs. 1,02,563, Rs. 1,52,289 & Rs. 2,22,285 respectively.

The difference will further widen if Reliance Fund charges 0.75% extra ( Total cost is 1.50%). This is very much possible as they are paying 1.00% upfront commission to distributors.

Pankaaj Maalde
CERTIFIED FINANCIAL PLANNER

Rakesh taneja

6 years ago

Fund is good because gold will be gold who is beckend of most currencies ? Gold, good apporchunity for small investor surely give good returne in first 2 years enjoy but I am not aware for topup issue if it is available surely very good if golds goes dowen momently and you have extra load in your pockets
Rakesh taneja

paresh

6 years ago

Approach of this article is that this fund is meant for non-Demat holders..
In fact how many demat holders trade ETFS in their account?Rather how many people trade in their share account for trading and how many for investment??Authour should take view of it first...most of the Demat holders do not know what is Gold ETFs...and who knows it they only trade it ..not invest in it.

REPLY

Silver Impex

In Reply to paresh 6 years ago

Sure agree with rakesh Gold is not likely to fall but i have a suggestion for reliance soon launch silver fund. This can give unto 200% return in two years

Ajeet

In Reply to paresh 6 years ago

Its not the approach of the article.
Its the approach of Reliance.

ratna

In Reply to Ajeet 6 years ago

Correct. Fund houses have realised that very few are buying gold etfs. They want to expand their customer base to the vast majority who dont have demat account

paresh

In Reply to ratna 6 years ago

peoples having demat also can invest in this fund.As there are limitations to Gold ETFs.In Gold ETFs one needs to purphase min.1 unit(1 Gram) which comes above Rs.2000 and not affordable for everyone.

paresh

6 years ago

Since last few years Gold is gaining status of currecy rather than commodity....that is also currency of not any nation but currency of universe..Before few years it was only domestic demand ,,,but now international Gold ETFs,Hedge funds,Investment bankers,countries like China are picking up gold on every correction....so people like us at least accumulate it per month basis..

paresh

6 years ago

I want to remind authour that loss or gain both are not permanent in assets like equity ,Gold(commodities) or currencies till we book it.....so even gold crashed ahead by 50-60%,,will loss be permanant???

REPLY

Melvin

In Reply to paresh 6 years ago

All the article asks is "How will a risk-averse investor react..."<br /> Is that a wrong question to ask? <br /> Dont we know how even the smartest professional managers react against large losses even when the know that loss is not permanent? <br /> This is a very balanced article, given that most people dont understand RISK

paresh

In Reply to Melvin 6 years ago

There is a risk in trading point of view...not investment point of view.There is a risk trading in futures market but not in investment form.

Santosh

In Reply to paresh 6 years ago

Even assuming you are right, no investor will be satisfied with your assurance that investment will come back some day. Ask Reliance Power shareholders ;-)

paresh

6 years ago

sensex comes down from 20,000 to 9000 levels in 2008. who continues with their systemaic investment proved fruitful for them,, similar case for Gold,,though it crshed 50-60%,,continue with systematic investment...don't worry...finally it has to come up..so invest through this fund only..in systemaic way...and get rich.

REPLY

Madhav

In Reply to paresh 6 years ago

NDTV has come back? TV18 has come back? Reliance Power has come back? Stocks at least go up on profits. Nobody can say for certain what will drive gold prices up.
Dont mislead people about investment risk. Moneylife and a few other websites are the lone voice in pointing out risk when all planners and advisors like Paresh do is highlighting the returns

RCom signs pact with Radio Netherlands Worldwide

R World–the mobile portal from Reliance Communications--would offer 24/7 live streaming of Radio Netherlands Worldwide

ADAG company Reliance Communications (RCom) has signed an agreement with broadcast company Radio Netherlands Worldwide.

Under the agreement, R World-the mobile portal from RCom--would offer 24/7 live streaming of Radio Netherlands Worldwide and will showcase its RNW WAP news feed on RWorld which includes regularly updated international news.

"News plays an important role in our day-to-day lives. Be it a college student, a young executive, a corporate chieftain or a small town entrepreneur," RCom 3G Head Prashant Gokarn said in a statement.

Radio Netherlands Worldwide (RNW) is a multilingual multimedia broadcasting company based in the Netherlands and has been in operation since last 60 years.

"We are extremely delighted about our collaboration with Radio Netherlands Worldwide to offer live news to our 125 million customers at touch of a button on R World," Gokarn said.

"This is the first telecom company with which we have a partner relationship and we are looking forward to many more on a global basis along with advancements in technology," said Jan Hoek, RNW's Director General.

RNW will be available on RWorld at browsing cost of 5 paise per 10kb.

On Friday, RCom ended 6.80% down at Rs93.15 on the Bombay Stock Exchange, while the benchmark Sensex declined 1.60% to 18,211.52.

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L&T Infra Finance may raise funds via ECB next fiscal

L&T Infrastructure intends to raise Rs100 crore through its infrastructure bonds

L&T Infrastructure Finance Company, an L&T Group company, may undertake external commercial borrowings (ECB) route to raise funds in the next fiscal.
According to Ramesh Bhujang, vice president-risk and asset management, the company is exploring an option of going for ECBs in the first half of next fiscal.

"As per RBI guidelines, we are eligible to raise 50% of our net worth which is at present between Rs1,100 crore to Rs1,200 crore. We are in negotiations with a few banks. However we have not decided the exact amount. We will decide that based on market conditions," Bhujang said.

L&T Infra has come up with its second tranche of infrastructure bonds recently.

The company intends to raise up to Rs100 crore through these bonds with an option to retain an oversubscription of up to Rs300 crore for allotment of additional bonds.

GK Shettigar, vice president (Treasury) said the total outstanding advances of the company is Rs5,200 crore with a disbursement ratio of 35 per to power sector, 14% in road projects and 16% in oil and natural gas and telecom sectors.

On Friday, L&T ended 3.19% down at Rs1,639.75 on the Bombay Stock Exchange, while the benchmark Sensex declined 1.60% to 18,211.52.

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