The fact that gold has remained an important asset class for centuries and has been acknowledged as an effective hedge against inflation and market volatility has never been truer.
Investing in physical gold can be done in various ways, such as buying physical assets or investing in gold exchange-traded funds. An interesting option is the HDFC gold fund.
This is a diversified open-ended mutual fund that seeks to provide growth of capital and dividend income by investing in domestic gold or gold-related instruments.
As with most other gold funds, this scheme comes with high risk too. Investors must consider their risk-o-meter and financial goals before investing in this mutual fund.
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What Will I Learn?
- HDFC Mutual Fund Highlights
- What Is the Expense Ratio for Such Mutual Funds?
- Does the HDFC Gold Fund Generate Capital Appreciation?
- Exit Load Details for One Financial Year
- Partnering with the HDFC Asset Management Company
- Net Asset Allocation and Weightage for the Direct Plan
- Annualized Returns and Net Asset Value for This Fund House
- Investment Objective of the HDFC Gold Fund (Growth Option) - Wrapping Up
HDFC Mutual Fund Highlights
Category average – +11.09%
Annual returns – 5.55%
Risk factor – High
What Is the Expense Ratio for Such Mutual Funds?
The expense ratio of the HDFC gold fund growth plan is 0.55%. This comparatively lower expense ratio is more cost-effective than its peer category average of 0.81% (Nippon India ETF Gold BeES).
Does the HDFC Gold Fund Generate Capital Appreciation?
This HDFC gold scheme seeks to provide returns that correspond to the returns of domestic gold prices. The fund has proven to be a great avenue to diversify your investment portfolio and generate capital gains, given the investment risks associated with most other asset classes.
Exit Load Details for One Financial Year
Regarding the exit load concerning this fund, if the units are redeemed or switched out within six months of the allotment date, an exit load of 2% is charged on each purchase or switch-in of units.
However, if the units are redeemed after six months but within a year of the date of allotment, only 1% will be due. Note that no load will be due beyond a year of the allotment date.
Also, investors should know that unless the investment was made directly, without using a distributor code, switching from a Regular Plan to a Direct Plan within the same scheme will be subject to the applied load and fund charges.
Also Read: What are the Top Gold Mutual Funds?
Partnering with the HDFC Asset Management Company
With HDFC gold funds, investors looking for steady long-term growth from a mutual fund can benefit from the scheme that seeks to bring domestic prices into line with global prices. HDFC gold also offers tax benefits, including income tax concessions.
Net Asset Allocation and Weightage for the Direct Plan
Physical gold is considered to be a secure and safe investment. Staying true to that notion, the direct plan of the HDFC ETF provides more liquidity with fewer associated costs.
Investors wanting to make a minimum SIP investment of Rs.1,000 can enjoy a weightage of 100.10% attributed to gold, making it a reliable investment option in line with the domestic price. On the other hand, the Sharpe ratio for a minimum investment is only 0.84.
Annualized Returns and Net Asset Value for This Fund House
The HDFC ETF is a popular fund amongst investors, as it seeks to provide an optimal level of return on the local price of gold, as well as tax gains. It has a minimum investment requirement of Rs.5,000. Here are the annual fund returns expected from the direct plan –
10 years – 4.90%
Five years – 11.30%
Three years – 16.80%
One year – 11.30%
Investment Objective of the HDFC Gold Fund (Growth Option) - Wrapping Up
The HDFC gold fund growth plan is an open-ended mutual fund scheme. This HDFC gold exchange-traded fund seeks to invest in physical precious metals or other derivatives of gold.
With its potential to incur higher fund returns, generate low annual charges, and hold a low-cost structure against peer comparison, clients can start investing in potential growth opportunities with this HDFC mutual fund.
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