Gold Traded Mutual Funds

"Gold is a wonderful thing! Whoever possesses it is lord of all he Wants. By means of gold one can even get souls into Paradise."
- Columbus

Gold is one of the good investment avenues open for many reasons.

Why one should invest in gold?

The uncertainty in world markets, particularly the US economy and the weakening of US Dollar against world currencies coupled with phenomenal rise in Oil prices, cascading price rise and inflationary trends - all these point to the need for strong world currency and that is the yellow metal- "THE GOLD". The Bullion has its own Standard. Besides, it is said to have sentimental values particularly in the Asian countries. Over time, it has proved to be an excellent preserver of wealth.

Gold has maintained its value in terms of real purchasing power in the very long run in all the countries especially in the US, Britain, France, Germany and Japan. Despite price fluctuations, it has consistently retained its historic purchasing power parity with other commodities and intermediate products.

Gold traded mutual funds are the answer for people who want to invest in the yellow metal without the real difficulties of holding it. For example, to buy gold for investment, one has to spend time to verify its weight, purity (particularly in third world countries) quality & other aspects. After all these, the problem of safe- keeping hovers over one's head. Now Gold Traded Mutual Funds offer all the benefits of such investment without any of the above physical difficulties. Gold's liquidity, acceptability and portability are particularly important in times of need. In essence, all these benefits are retained & rendered by Gold Traded Mutual Funds.

How these Gold Traded Mutual Funds operate?

They accept funds from public and buy 100% pure assayed gold. They issue unit certificate to the public for each gram of gold invested by them. For example, if one wants to buy 100 grams of the yellow metal, one has to buy 100 units from the Mutual Fund. The price of each unit depends on the price of the yellow metal ruling on any given day.

This investment can be kept in paper or in a demat account. These units can be surrendered to the fund and bars can be obtained in return (if required).

How the Fund repays in gold bars?

All the gold bought by the Fund is deposited with a custodian- usually a reputed banker- for safe keeping in their safe vaults. Once the fund units are surrendered, the Fund authorizes the banker/ custodian to release them.

So this helps the investor to get back gold or retain the deposit (investor's choice). Since these units are traded in the market, anybody can sell these units easily in the market at the price prevailing on that day. One need not search for a buyer as in the case of selling physical gold.

Gold Traded Mutual Fund offers all the benefits of investment in the yellow metal without its physical difficulties. The major advantages of these funds are:

• Safety
• Liquidity
• Convertibility to physical gold
This is one area that an investor can look forward to invest. However there are many more alternatives to invest. To know about investing in mutual funds visit Investing in Mutual Funds and to get an idea as to how mutual funds work visit Mutual Funds

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