Golden Investment

With gold prices touching record highs, the Indian middle class has started to feel that gold investment is out of their reach. There are two schemes that have been launched recently keeping this section in mind.

The Muthoot Pappachan Group has introduced a microfinance savings scheme known as Swarna Varsham, in association with the World Gold Council. Under this scheme, consumers can go to the nearby service provider and book gold at today’s price by paying only 15 per cent of the amount. The rest can be repaid in 12, 24 or 36 months’ instalments. You can purchase 1, 2, 4, 8, 20 or 100 gm according to your requirement. There is also a free locker facility to store the gold. The scheme has a buyback option and comes with attractive features, such as foreclosure and part-release options. However, you have to make a down payment for joining the scheme.

Another attractive way of investing in gold is through exchange-traded funds (ETFs). But very few fund houses offer SIPs for these funds. Also several middle class consumers do not have a demat account. Reliance has launched an MF scheme that addresses these challenges. Reliance Gold Savings Fund is an open-ended fund-of-funds scheme, which would be passively managed and invest primarily in Reliance Gold ETF. Therefore, its returns would closely mirror the returns of Reliance Gold ETF. Those without demat accounts can invest through the physical mode. There is no entry load for this scheme, but an exit load of 2 per cent would be charged if the units are redeemed before one year. The minimum application amount is Rs 5,000. You can also invest through an SIP with as little as Rs 100 per month.

But the expense ratio for this scheme is about 1.5 per cent per annum, which is higher than the average expense ratio of an ETF. Sundeep Sikka, CEO, Reliance Capital Asset Management, says he expects the gold investment industry to surpass that of equity MFs in the next three years.