Buying Gold Funds Suggestion needed.


Compiler

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This is with Reference to my old post
http://www.techenclave.com/general-talk/best-place-to-buy-gold-biscuit-182486.html

Where i was intend to buy some gold as future investment.
I was about to buy real gold in terms of coins or biscuits.But after reading the comments from other user, decided to go for gold funds.

I was never into this and this is my first attempt to invest in share market.Recently opened dmat account with hdfc securities so any one having experience with hdfc securities are welcome to share their views.

To start with i m planning to buy 3-4 gram of gold and keep it for 1 year (not more than that) .
Have following doubt in my mind?
1) How much transaction fees should i need to pay to HDFC Securities?
2) Will it be profitable to buy such less amount of gold and expect any profit considering the transaction fees involved in buying and selling the funds.
3) What is the difference between BSE and NSE? Which one is suitable for me?
4) Shall i select option to buy at market price or specify my price?
5) What do you mean by sl and rl(Regular Lot or Stop Loss)?
6) Which gold fund is better ?
7) After some of initial analysis i have decided to go for kotak gold .Is this a wise selection?
8) What is the difference between Kotal Gold ETF(2712.19) and Kotal gold fund(13.16)?
9) Some says you can only buy gold through commodities exchanges like MCX .Does this mean I can't buy gold using HDFC securities?
I know lot of questions but i would like to get as much as information before i start trading.
 

Praks

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I would say, Stay away from gold funds. Why not ETFs, They are safer bet.
 

pr0ing

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e-Gold is another option to consider. This is a relatively new product from NSEL (National Spot Exchange Ltd.). A few interesting links explaining this and some comparisons.

E-Gold and E-Silver from NSEL

E-GOLD: The new name for gold - Moneycontrol.com -

Invest in Physical Gold online with E-Gold

Business Line : Investment World / Personal Finance : E-gold vs. Gold ETF

Last link gives a tabular comparison but it is incomplete. Both the 2nd and 3rd links mention a monthly expense of 60paise/Unit which is not mentioned in the comparison. 0.6Rs/month for 1gm of gold comes out to be about 0.257% per annum with current gold rates.

From my calculations the total expense/brokerage on e-Gold comes out to be slightly cheaper than the gold ETF option. I'd like to have opinions of other serious investors regarding the total expenses involved and some comparison between these options.

@OP

if you are looking for a quick solution for just 3-4 gms of investment, get the ETFs as the time involved in checking the ins and outs of other alternatives will not be worth it.

For further research. Some gold funds/ETFs. Your choice of Kotak looks to be a good one. There is not much difference in these since all the do is track the price of Gold.

Check the entry load, exit load, yearly expense ratio, brokerage to find out how much they actually 'cost' you.

Value Research: The Complete Guide to Mutual Funds

Mutual Fund :- Mutual Fund Investment, Performance, NAVs, Returns Calculator, Compare funds

Answers to a few questions

1) How much transaction fees should i need to pay to HDFC Securities?

If you are buying a fund then the charges are called brokerage charges. Check on the website or call customer care.

2) Will it be profitable to buy such less amount of gold and expect any profit considering the transaction fees involved in buying and selling the funds.

Transaction charges are almost always a percentage of investment. There might be some minimum limit to the charges but if you are looking to invest for 3-4 gms I think it will be way over the minimum charges.

3) What is the difference between BSE and NSE? Which one is suitable for me?

Funds are not related to BSE/NSE. They are stock exchanges. you buy funds directly from the MF company. HDFC Securities will act as a broker between you two.

4) Shall i select option to buy at market price or specify my price?

If you select 'Buy at Market Price' your order will be executed immediately against the available 'sell offer' in the market. If you 'Specify a Price' your order will be added to the pool of 'Buy' requests and will execute only if someone puts in a 'Sell' order at your price.

I don't think these are related to a Fund's price. Funds have a fixed price for the day.

5) What do you mean by sl and rl(Regular Lot or Stop Loss)?

Stop loss is used to execute a buy/sell order when a specific price has reached. Eg. Sell 100 Infy if the price falls below XX amount. Here XX is the stop loss. Again, not related to a fund.

7) After some of initial analysis i have decided to go for kotak gold .Is this a wise selection?

Looks good enough. Not much difference in the top rated funds.

9) Some says you can only buy gold through commodities exchanges like MCX .Does this mean I can't buy gold using HDFC securities?

HDFC Securities is a Brokerage firm. They can offer access to MCX too. I am not sure whether they do.

If you have just opened a demat account, try to go for training programs if HDFC conducts them. ICICIDirect does. Try to learn about the various investment opportunities before putting your money in them. It is very easy to lose money, take care.
 

Compiler

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Thanks for your views. Purchased 3 gram of gold using Kotak.

Brokerage charges were 51 Rs.
 

Praks

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@OP

E Gold may need separate Demat account & may not be same as Equity account.

Gold prices came down heavily today. :)
 

Kneo

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Jun 27, 2006
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GoldBEES is the best option out there. Do a SIP of a gram per month.
 

Kneo

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Systematic Investment Plan - Just do a Google search on the same. In a nutshell, you keep buying at regular intervals irrespective of what the price is. This way you can average out your cost. Typical mentality would be to buy only when the markets are positive (high price) and not when markets are crashing (low price). This happens in equity - gold would be reverse i.e. it'd be high when markets are falling and vice versa.

Invest around 2.5-5K (depending on how much you want to invest) a month irrespective of price.
 

pr0ing

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you should be looking for dedicated forums/sites if you want to learn more about these. It is very easy to get wrong advice with such a few members posting.

SIP means Systematic Investment Plan. If you opt for a SIP it means you commit to investing X amount every month. This helps if you want to invest regularly but do not have the time to go through all the formalities every time. Money can be committed by either giving post dated cheques or by direct debit from you bank account.

a lot more detailed explanation.

What is Systematic Investment Plan or SIP?
 

Praks

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Kneo said:
GoldBEES is the best option out there. Do a SIP of a gram per month.
Can you please tell how do you do SIP on GoldBEES ? Its just ETF, How do they adjust SIP on it ? Which company does that ?

AFAIK, SIPs are mostly for Mutual funds/Gold Funds, not ETF.