Mutual Fund- FAQs
General
Money Market Mutual Funds(MMMFs)
Equity Linked Savings Schemes(ELSS)
Systematic Investments Plans(SIPs)
Fixed Maturity Plans(FMPs)
Capital Protection-Oriented Funds(CPFs)Gold Exchange Trade Funds(GETs)
Gold exchange traded funds (GETFs)
What is an Exchange Traded Fund (ETF)?
ETFs generally are mutual fund schemes that are listed on the stock exchanges and traded like common stock. The traded price of the ETF units on the exchange reflects, before expenses, the value per unit of the underlying assets of the fund.
What is a GETF?
GETFs are open-ended funds and present a relatively cost-efficient and secure way to access the gold market but without the necessity of taking physical delivery of gold. GETFs may be bought and sold on a stock exchange after listing.
How do GETFs work?
GETFs provide returns that, before expenses, closely correspond to the returns provided by the domestic price of gold through physical gold. Each unit will be approximately equal to the price of 1 gram of gold.
How do I invest in GETFs?
Initial investments may be made through a new fund offering (NFO) in the specified form of the mutual fund selling the GETF. Units during NFO will be available at the NAV-based price on allotment date. After the NFO, investors can buy or sell units on an exchange where the GETF is traded.
Who can invest in a GETF?
An individual resident, NRIs, firms, HUFs, companies, banks and trusts.
What type of account is required for trading in a GETF?
You need a trading account with an exchange through its broker and a demat account as GETF units are issued only in demat form.
How is a GETF valued?
According to SEBI, since physical gold and other permitted instruments linked to gold are denominated in gold tonnage, it will be valued based on the market price of gold in the domestic market, and marked to market on a daily basis. The market price of gold in the domestic market on any business day will be arrived at as under:
Domestic price of gold = (London Bullion Market Association AM fixing in US$/ounce X conversion factor for converting ounce into kg for 0.995 fineness X rate for US$ into INR) + custom duty for import of gold + sales tax/octroi and other levies applicable.
Which is the benchmark index for a GETF?
As there are no indices catering to the gold sector or to securities linked to gold, GETF is currently benchmarked against the price of gold.
What are the advantages of GETFs over physical gold?
GETFS have the following advantages:
· They are cost effective, because investors hold gold at the prevailing market price without being subject to designing and storage charges and insurance costs
· They carry no impurity risk unlike physical gold
· Their underlying asset, gold, is held by a custodian, and is, therefore, highly secure
They have high liquidity and can be easily sold in an exchange at prevailing prices. Investors can also buy as little as 1 gram of gold through a GETF.