SBI mutual funds: The new SBI Gold Fund!

So, you’ve all heard about the spanking new SBI Mutual Fund – Gold Fund and read interviews and reviews. The Gold Fund comes in at a time when gold prices are soaring and it has become difficult if not impossible for the average Indian to buy even a small quantity of physical gold. Let’s take a moment and check out the Gold Fund from SBI Mutual Fund.

SBI Mutual Fund – Gold Fund: Key dates of the New Fund Offer

The NFO for SBI Mutual Fund’s Gold Fund is open for subscription from 22 August and closes on 5 September 2011. The NFO price for the Gold Fund is Rs. 10 per unit.

SBI Mutual Fund – Gold Fund: What are the underlying assets?

A majority of the underlying assets of the Gold Fund are units of the SBI Gold ETF. Confused? Here’s the deal. You can own gold in a number of ways. First, you can either own gold physically. Second, you can buy Gold ETF. A Gold ETF will invest in physical gold. Third, you can buy a Gold Fund like the one launched by SBI Mutual Fund. The Gold Fund will invest in units of the Gold ETF, which in turn will invest in physical gold.

The Gold Fund will invest monies into the SBI Gold ETFs (95-100% asset allocation) and Money market instruments (0-5% asset allocation).

SBI Mutual Fund – Gold Fund: Minimum investment and loan

The minimum investment for the Gold Fund is Rs. 500 and in multiples of Re. 1 thereafter.

There is no entry load for the Gold Fund and no exit load either, if you redeem it after 1 year from the date of allotment. However, if you redeem it before 1 year, there is a 1% exit load.

SBI Mutual Fund – Gold Fund: Points to ponder

Unlike a Gold ETF, you don’t need a demat account to invest in the Gold Fund from SBI Mutual Fund. Many investors who are not fond of investing in the Stock Exchange can pick this route to invest in gold.

The Gold Fund is a good way to own gold because there are no hassles of storing the physical or having to worry about its purity. We think this is great, but then why not invest in Gold ETFs through your demat account in the first place?

The Gold Fund gives investors an opportunity to invest in gold through a Systematic Investment Plan (SIP). Most advisers recommend SIP especially at times like these when gold prices are high. The SIP route is a great way to reduce risk.