Axis Gold Fund Review – Should you invest?

Mutual Funds

oi-Monika

By Monika Nihalani

Published: Tuesday, September 27, 2011, 15:38 [IST]

After realty sector crashed down in late 2007-08, that's the gold which is ruling the 'rocking chair' these days. To reap the benefit of hyped up gold-mania, every other mutual found house is coming up with new gold investment schemes.

After SBI and ICICI, Axis Mutual Fund is also launching a new fund scheme named as 'Axis Gold Fund' especially designed for people who want to want to invest in Gold via systematic investment plan (SIP).

What is Axis Gold Fund?
Axis Gold Fund is a fund of fund which will invest in the units of Axis Gold Exchange Traded Fund (ETF). It means it will not invest in Gold directly but will own another fund (Axis Gold ETF), which owns the physical gold. This fund provides you an option to invest in gold indirectly without holding a Demat Account but in an expensive way.

Axis Gold Fund or Axis Gold ETF

Gold Exposure: While investing in Axis Gold Fund, you will have the benefit of buying paper gold every month through SIP, whereas by investing in Gold ETF, you will have direct exposure towards gold as fund manager will invest in physical gold on your behalf. The funds’ performance is benchmarked to gold prices directly.

Minimum Investment: Minimum investment to invest in Axis Gold Fund is Rs 5,000 in case you are opting for one time investment and Rs 1,000 through SIP route. While, minimum investment in Axis Gold ETF is 1 gram, which is equivalent to current prevailing price i.e. Rs 2,600-2,700.

Expenses: The charge of buying Axis Gold Fund is higher than Axis Gold ETF as the former is fund of fund. The document of Axis Gold Fund has specified annual recurring expenses of 0.75% but it has also mentioned “The investors will bear the recurring expenses of the scheme in addition to the expenses of other schemes in which Axis Gold Fund will make investment.” This implies, the fund investor has to pay for this fund's cost plus the expenses of Axis Gold ETF. While investing in Axis Gold ETF, investor has to bear only brokerage charges for buying and selling of units.

Exit Load: While investing in Axis Gold Fund, you will have to bear 1% exit load if redeemed or switched out within 1 year from date of allotment, whereas in Axis Gold ETF, there is no exit load.

View: Benefits of Gold ETF usually weighs down over the benefits of Gold Fund in terms of expenses. If you buy Gold ETF, you will have to bear only expense ratio which in case of Axis Gold ETF is 1% plus your brokerage charges when you buy or sell the units. While there is no brokerage charge in case of Axis Gold Fund but you will have to bear dual annual expenses (0.75% + 1%). In addition to this there is also exit load in Gold Fund if redeemed or switched before an year, which is not there in Gold ETF.

So, it is always advisable to invest in Gold ETF than Gold Fund.

(If you want to read more about Axis Gold Fund, click here)

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