Assets Under Management AUM

Two experts suggest how to look at small-cap funds

Amol, let’s talk about gold. The most common thing everyone says is to buy a Gold ETF, and a lot of people have done it and maybe with the right advice too. I want to understand, other than ETFs, what can a mutual fund investor do to profit from rising gold prices? Again, nothing says that this is how gold prices will continue to behave. What do you recommend?

AMOL JOSHI: In my opinion, this is a very interesting question and there is more than one way you can profit or rather take exposure, I would say in an asset allocation framework, you can take exposure to the gold. First and foremost, as you mentioned ETFs, a lot of people have done it. Perhaps the biggest attraction of ETFs is their low cost. If we go beyond low cost, if you’re talking to a retail investor about how retail invests and how most investors invest, they basically want exposure through SIPs. Many brokers, older or older, still do not offer SIP service. If you want to get exposure to gold through SIPs, you can simply go for a gold savings fund. A gold savings fund is nothing more than a mutual fund, which invests in gold ETFs. So, here it is a little more expensive, of course, because it is not an ETF structure. Other than ETFs, you can look at gold savings funds, this is number one. Second, the reason I mentioned this is because it is a very interesting question. Although this is a mutual fund issue, we can talk about something that really benefits clients, so something like a gold sovereign bond, it is really beneficial because it has various advantages. . Any kind of financial product, if you look at it, has costs. Sovereign Gold Bond is probably the only product you can think of that has no cost plus it gives you 2.5% annual interest and after all said and done, it’s an ATM product. So if you hold to maturity for a 5 or 6 to 8 year horizon, you don’t have any capital gains either. So no expense ratio, 2.5% annual interest and you get a redemption price of gold, which is totally tax free. This is the second way. Like I said, there is more than one way to expose yourself to this theme. The third way is something that is thematic. We have discussed this several times in this same show on themes or sectors in which you can invest. When gold prices go up, of course, things are doing well, and gold companies are doing well, too. I would say you can expose yourself to gold mining companies. Now we don’t have a lot of gold mining companies in India. Most of the companies are international. You can get exposure to something like the DSP World Gold Mining Fund, which invests in gold mining companies. But beware, it’s not just the risk of gold prices. There is also a risk associated with stocks. Businesses are in debt. If there were to be a drop in the prices of stocks or if there was a stock market crash, so to speak, even when gold prices are robust, you will likely see a drop in the prices of those stocks and, by therefore, the net asset value a tube. So these are the three options besides Gold ETFs that you can look at.

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