Gold funds or gold mutual funds, as is apparent from the name, are focused on investing in gold through various routes. Some of the common formats employed by this type of mutual fund to make its investments include physical gold, equities of companies engaged in mining/prospecting for gold, gold ETFs, etc. The main concern with gold funds is that they invest in only a single commodity/sector – gold, hence they are prone to a high degree of sector-specific risk. This risk is primarily based on the movement of gold and the performance of gold company assets either domestically or internationally.
Investment Objective and Strategy of Reliance Gold Savings Fund
The Reliance Gold Savings Scheme is designed to provide long-term capital growth by providing returns that are in line with the returns offered to investors of the Reliance ETF Gold BEES. This will be obtained by the fund through investments made in securities of the ETF. The basis of the Reliance Gold Savings Fund’s investment approach is to track the performance of the ETF shares and invest in them through the primary or the secondary market.
Tax Considerations for the Reliance Gold Savings Fund
The taxation rules for gold mutual funds are currently the same as those of debt mutual funds available in India. The short-term capital gains tax rules apply in case the investment is held for less than 3 years. The profits generated in this case are classified as income from other sources and taxed at the applicable slab rate of the individual investor. In case the units of the fund have been held for over 3 years, long term capital gains rules will apply. The tax rate for long-term capital gains is currently 20% with indexation excluding education cess and surcharge. The dividend earned from the Reliance Gold Savings Fund is tax-exempt in the hands of the investor, however, a 25% tax is applicable in the form of dividend distribution tax.
Reliance Gold Savings Fund Key Information and Statistics
Launch Date: The inception date for this scheme was the 7th of March 2011.
Fund Type: The Reliance Gold Savings Fund is an open-ended gold mutual fund scheme, which an investor can enter into or exit from as per his/her convenience.
Minimum Investment: The minimum one-time lump sum investment amount for this scheme is Rs. 5000, while higher investments are allowed in multiples of Re. 1 over this minimum amount.
Risk Category: This mutual fund has one major investment – the Reliance ETF Gold BEES. The value of this gold ETF is completely dictated by the price of gold and gold company assets in India and abroad. Thus this fund features a high degree of sectoral risk. However, as the fund features less volatility than the underlying gold ETF, it is classified as a moderately high-risk investment.
Entry/ Exit Load: In response to a SEBI mandate issued in 2009, the entry load for new investors in the mutual fund has been changed to zero. The exit load of the Reliance Gold Savings Fund investment is currently fixed at 2% on units that are redeemed on or before 1 year from the date the units were originally allotted. If redeemed/switched after completion of 1 year from the date of unit allotment, the exit load is waived.
Fund Manager: The Reliance Gold Savings Fund is currently managed by Ms. Payal Wadhwa Kaipunjal, who has been working with Reliance Nippon Life Asset Management Limited since 2016. A Welingkar Institute of Management Development & Research alumni, she has worked with leading companies in the financial sector. Ms. Kaipunjal’s prior employers include Goldman Sachs Asset Management (India) and Benchmark Asset Management Co.
Plans and Options for the Reliance Gold Savings Fund
Direct Plan: Prospective investors can choose to pay less in way of mutual fund expense costs if they opt for the direct plan. However, the direct plans are only available if the investor makes his/her mutual fund investments directly with the Reliance Nippon Mutual Fund AMC and a few select distributors through either the online or the offline route.
Regular Plan: Regular plans of mutual funds often called retail plans are the most common type of mutual fund investment plans available to an individual investor. These can be availed through a range of brokerage houses and distributors including Paisabazaar.com. The retail plan of the Reliance Gold Savings Fund features a slightly lower NAV than the mutual fund’s direct plan.
Dividend Option: This option and its variants - reinvest and payout, are available in case of both the retail and the direct plan offering of the Reliance Gold Savings Fund. This option is best suited for individuals seeking to generate consistent returns with less focus on capital gains when redeeming/switching their investments.
Growth Option: The growth option of Reliance Gold Savings Fund finds takers among investors who are seeking to generate capital gains in the medium to long term through their investments. This option of the fund does not offer any returns while the investor is holding units of the fund. Any profits of the fund get invested back into it to increase the NAV and the AUM (assets under management) of the gold fund. The benefit of this option is in the form of capital gains that the individual can book at the time of redeeming/switching the scheme units.
Portfolio Information of the Reliance Gold Savings Fund
Being a gold fund, the Reliance Gold Savings Fund invests a major portion of its capital in the Reliance ETF Gold BeES. As per data retrieved 31st May 2017, this ETF comprised an estimated 99.99% of the fund’s portfolio while the remaining amount is invested in various cash/call instruments. The fund has the leeway to make its investments in the Reliance ETF Gold BeES fund through either the primary or the secondary market.