I want to invest in a Mutual fund which has both gold and equity…

Posted on December 15, 2009
Filed Under Gold Investments, Investment Guide, Mutual Funds |


This was the question asked by someone on the famous website for Indian mutual funds Valueresearchonline.com, here’s the complete question and its answer provided by it… http://new.valueresearchonline.com/story/h2_storyView.asp?str=101079

The complete question goes like this…

I am looking to invest in a fund which has both gold and equity. Can you please suggest a fund which invests in an equal amount in both? Can you please furnish details such as past performance, ratings and risk return profile?

There is one fund which invests both in gold as well as equity - UTI Wealth Builder Series II.  It invests up to 35% of the assets in UTI’s Gold ETF (Exchange Traded Fund). And rest into equities.

Although this can be an answer to the question above, a more profound question is why would someone like to invest in such a fund? Today there is only one such fund, tomorrow there may be many. But one should realize what is he actually achieving by investing in such a fund. If the fund is simply investing a part of its asset into one of the gold ETF’s then can’t you yourself do it? I mean why you need a fund to do that?? Invest directly in gold ETF for your thirst of gold investment. And invest the remaining amount in any of the equity diversified mutual funds - and there are tons of very nice mutual funds in this category.

The point I want to make is, a high degree of interdependency  between two varieties of investment is not good for the investor as it him gives less control over his investments. In this case, if he separates Gold and Equity investments then he would have a plethora of choices for his investment, but if he decided to merge them, he just has only one. Besides that, although UTI Gold ETF is a good choice for gold investment , the rest 65% of the asset that is the equity diversification that fund is going to achieve for the investor is not the best! There are many good and trusted equity diversified funds, with proven track record, that can give him better equity investment portfolio and returns.

Moral: Think about the interdependency between the varieties of investments before you invest in any investment vehicle(e.g: a Mutual Fund).

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