Gold ETF

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Gold ETF

  1. 1. SMART WAYTO INVESTIN GOLD 1
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  4. 4. WHY INVEST IN GOLD 4
  5. 5. WHY INVEST IN GOLDGold prices show less fluctuations and provide stable returns in the long run. [ low correlation with other key asset classes ] 5
  6. 6. WHY INVEST IN GOLD 200 Equity Returns Gold Returns 150 Great Arab Oil Sub Prime Asian Crisis Depression Embargo CrisisPercent Returns 100 50 0 -50 -100 Japanese World War 2 Dotcom Bust Stock Bubble -150 1929 1939 1973 1989 1997 2000 2007 6
  7. 7. WHY INVEST IN GOLD 7
  8. 8. WHY INVEST IN GOLDGOLD IS A FUNDAMENTALLY DIFFERENT ASSET CLASS Gold Price vs. Inflation $1,200.00 $1,000.00 Gold is an economically secure asset i.e. it $800.00 is an asset which is no one’s liability & $600.00 hence $400.00  No risk of inflation $200.00 $0.00  No risk of repudiation 1980 1948 1952 1956 1960 1964 1968 1972 1976 1984 1988 1992 1996 2000 2004 2008 Gold Price Inflation Index Gold provides an incontrovertible liquidity unaffected by exchange controls or asset Gold as a Percentage of Total Reserves freezes 80 Q1 2001 Q1 2010 60 Gold has high public confidence 40 20 In the previous decade, most central banks have increased gold as a 0 percentage of total reserves in apparent response to perceived uncertainty 8
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  10. 10. WHAT CUSTOMERS WANT WHICH IS THE OPTION HOW TO EVADE THE RISKS OFCAN I SAVE ON PREMIUM THAT IS EASY TO BUY THEFT & IF I CAN SAVE ONAND MAKING CHARGES ? & EASY TO SELL ? LOCKER CHARGES 10
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  12. 12. CUSTOMER BENEFITSI PAY NO PREMIUM OR IT IS EASY TO BUY, NO WORRIES OF THEFT &MAKING CHARGES AND EASY TO SELL I SAVE ON LOCKER CHARGES 12
  13. 13. GOLD ETF (EXCHANGE TRADED FUND)Gold ETF are listed on NSE and can bepurchased using a demat account.Buying GOLD ETF is purchasing gold just like you buystock of any company from your broker.Every unit sold is backed by physical gold. 13
  14. 14. GOLD ETF (EXCHANGE TRADED FUND) Cheapest form of pure physical gold with no premium or making chargesWhat makes it attractive? No issues of wastage or impurities like in the case of physical gold Tax efficient way to hold gold, No Securities Transaction Tax or wealth Tax Can be easily purchased or sold anytime at transparent real time prices Can track your investment value in real time Easy to buy in small lots, 1 unit at a time. (1unit approx equal to 1gm of gold price in spot) Can build your gold portfolio unit-by-unit to the level you want No worries of theft and also save on locker charges Benefit on long-term capital gains Accepted as collaterals for loans Holdings in lots of 1000 gms can be converted into physical gold by AMCs 14
  15. 15. GOLD ETF FEATURE SPECIFICATIONSType of fund Non Equity ETFInvestment In underlying physical goldTaxation treatment DebtUnit ~1 gm of gold, typicallyTick Size INR 0.01Minimum Lot (on Exchange) 1 unitMinimum Lot (Direct) 1000 unitsExpense Ratio ~ 1.00 %Trade hours Same as cash marketPrice As determined on exchangeTrade cycle T+2 90 – 100% is GOLDAllocation Pattern 0 – 10% is Money market, securitized debts, bonds and cash at call 15
  16. 16. GOLD ETFs listed with NSE 10 GOLD ETFs that you can select from Unit Size Name Inception (gm) Gold BeES 15-Feb-07 1 UTI-Gold ETF 01-Mar-07 1 KOTAK Gold ETF 20-Jun-07 1 Reliance Gold ETF 15-Oct-07 1 Quantum Gold Fund 24-Jan-08 0.5 SBI Gold ETS 30-Mar-09 1 RELIGAREGOLD 28-Jan-10 1 HDFC MF Gold ETF 25-Jun-10 1 ICICI Prudential Gold ETF 30-Jun-10 1 Axis Gold ETF 20-Oct-10 1We recommend you contact your broker who will guide you with your selection 16
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  18. 18. GOLD ETFs COMPELLING COST ADVANTAGE GOLD PURCHASE (AS ON 07-02-2011) Jewellers Banks* Gold ETF Local#Standard (purity) 995 999 995Market Price(per gm) 2,276 2,666 2,156Adjusted Price (for 995 purity) 2,276 2,653 2,156Initial Investment (10 gms) 22,755 26,529 21,560Brokerage - - 108VAT @ 1% 228 265 -Net Cost 22,983 26,795 21,668 By buying GOLD ETF, you save more*Price taken from HDFC Bank website. #Average price is 2-3% over spot price.. AMC Annualized Charges as applicable on Gold ETF (approx 1%)*Gold Fund of Funds will cost approx 0.5% more per annum than a comparable ETF because of AMC charges. 18
  19. 19. GOLD ETFs COMPELLING TAX ADVANTAGES Tax Computations Jewellers Banks Gold ETFWealth Tax Applicable Applicable NALong Term Capital Gains 3 Years 3 Years 1 YearValue Added Tax Applicable Applicable NA For an investor, a Gold ETF has the most favorable post tax outcome 19
  20. 20. COMPELLING LIQUIDITY ADVANTAGES Liquidating the Assets Jewellers Banks# Gold ETFAbility to sell for cash No No YES Yes , forAbility to exchange for other asset No NA Jewellery MarketTransparency in Exit Price NA NA priceExit Load NA* NA ~0.25%** Gold ETF can be sold for cash at the then-prevailing market price through an NSE trading member#Banks are prohibited by RBI from buying back physical gold *No making charges & weight loss for gold bars/coins **Brokerage. STT is waived. 20
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  22. 22. COMPARE WITH OTHER INVESTMENTS 22
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  24. 24. GOLD ALLOCATION IN THE PORTFOLIOWe have seenGOLD IS A SAFE HAVEN DURING CRISES IN THE MARKETSGOLD HAS PROVED ITSELF TO PROVIDE STABLE RETURNSHOW GOLD ETFS ARE THE SMARTER WAY TO BUY GOLD : CHEAPER, SAFER & EASY TO SELLMost money managers recommendgold allocations of 5% to 20% within client portfolios, depending on risk profile.Even if you have previously purchased gold ETFs, remember that the proportion of various assets in yourportfolio needs to be adjusted periodically.Please consult your broker on how much allocation to Gold ETFs inyour portfolio is suitable for you. 24
  25. 25. DISCLAIMERThis Information Dossier is only an explanatory note prepared by National StockExchange of India Ltd. (NSE) to provide a further clarification to the investors with respectto investing in Gold ETF. While every effort is made to present accurate and reliableinformation, NSE does not endorse, approve, or certify such information, nor does itguarantee the accuracy, completeness, efficacy or correct explanatory note of theGold ETF. The Information Dossier does not constitute an offer or solicitation to invest inGold ETF. NSE accepts no responsibility whatsoever for any consequences arising out ofthe use of the Information Dossier including any investment decisions taken by theinvestors based on this Information Dossier. 25
  26. 26. THANK YOU 26

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