Anil Ghelani, CFA, head – passive investments and products at DSP Mutual Fund, says that gold’s low correlation with equity and debt-heavy portfolios makes it a valuable addition to one’s portfolio.
“The scheme structure presents a convenient way to diversify your portfolio and accumulate gold in a systematic manner,” he said.
The DSP Gold ETF Fund of Fund will help an investor own gold in a digital form, eliminating the need for a demat account if one directly invests in Gold ETF. It also allows systematic investment in gold through systematic investment plans (SIPs), thus offering flexibility in redeeming units without any lock-in period.
According to DSP Mutual Fund, global liquidity constraints, increased central bank demand, and a stagnant supply presents an opportune moment. “Investments in gold have typically done well at a time when there is a weakness in the dollar,” the fund house said in a release.
Over the past 20 years as of September 30, 2023, gold as an investment has delivered a return of 12 per cent CAGR, the fund house said. However, investors should anticipate short-term fluctuations, given the cyclical nature of gold investments, it added.
A fund of fund (FOF) is a mutual fund that collectively invests in other accessible mutual fund schemes in the market. Investors seeking Gold ETFs typically require a demat account with a depository participant (DP). Gold mutual funds and FOFs eliminate this need.
But unlike Gold ETFs, gold fund schemes entail an expense ratio and tracking error. In this fund, the direct plan has an expense ratio of up to 0.2 per cent.
At present, there are 11 similar gold ETF Fund of Funds listed on the Association of Mutual Funds in India (Amfi) website. When assessing the category average, the 1-year average return stands at 18.66 per cent, the 3-year average at 5.36 per cent, and the 5-year average at 12.90 per cent.