In a move timed with the festive season, Zerodha Mutual Fund has launched a new fund offer (NFO) for its Gold ETF FoF (Fund of Funds) scheme. Gold has been a popular asset on Dhanteras and Diwali, and Zerodha’s fund opens doors for those seeking to invest in gold without the hassles of buying and storing physical gold. This NFO, open from 25 October to 8 November 2024, allows investors to gain exposure to gold ETFs instead of purchasing gold directly. Here’s a closer look at what Zerodha’s Gold ETF FoF offers and whether it could be a fit for your portfolio.
Key Highlights of Zerodha’s Gold ETF FoF NFO
- Fund Type: Open-ended scheme that invests in Gold ETFs.
- NFO Period: 25 October to 8 November 2024.
- Investment Requirement: Minimum initial investment of ₹500.
- SIP Option: Available with a minimum installment of ₹500.
- Expense Ratio: Capped at a maximum of 1% as per regulatory guidelines.
This fund is designed to provide long-term capital growth by investing primarily in gold ETFs, making it an option for those who seek the benefits of gold investing but want to avoid the complications of purchasing and storing physical gold.
Understanding the Investment Strategy
Zerodha’s Gold ETF FoF primarily aims to track the domestic price of physical gold. The fund plans to allocate around 95-100% of its holdings in gold ETFs, while the remaining 0-5% will be invested in debt securities and money market instruments.
Using a passive investment strategy, Zerodha Mutual Fund’s Gold ETF FoF aligns itself closely with gold price movements, ensuring that it provides investors a near-direct exposure to gold’s market value. Since it’s based on ETFs, the fund remains relatively flexible and liquid.
Why Consider Investing in Zerodha’s Gold ETF FoF?
For many, investing in gold has always symbolized security, especially around festive occasions like Dhanteras and Diwali. Zerodha’s Gold ETF FoF could be attractive to investors for several reasons:
1. Convenience of Gold Investing without Physical Storage
With this FoF, investors can gain exposure to gold prices without the need to worry about securing and storing physical gold. This makes it a more practical option for those who want a simpler way to invest in gold as part of their portfolio.
2. Potential Hedge Against Inflation
Gold has traditionally been viewed as a hedge against inflation. When inflation rises, gold prices often increase as well, helping investors preserve their purchasing power. Zerodha’s Gold ETF FoF could serve as a buffer for those concerned about inflation’s impact on their wealth.
3. Portfolio Diversification
Since gold generally moves independently of stock market trends, adding a gold-based fund can help reduce overall portfolio risk. For those who primarily invest in equities, this fund may offer a stabilizing effect by reducing portfolio volatility.
4. SIP-Friendly Investment
This NFO offers the option to invest through a systematic investment plan (SIP) with a minimum installment of ₹500. Investing through SIPs can make it easier to build exposure over time, reducing the impact of short-term market fluctuations on a lump-sum investment.
Things to Keep in Mind Before Investing
While Zerodha’s Gold ETF FoF offers several potential benefits, investors should also be mindful of certain considerations:
- Gold Price Volatility: Gold prices can fluctuate, particularly in the short term. For investors seeking stability, it’s worth noting that gold’s value may rise or fall, depending on market dynamics. This NFO is best suited for those with a long-term horizon who can handle some price volatility.
- High-Risk Category: This fund is categorized under “High Risk.” Although gold is often considered safer than equities, any investment in gold still carries inherent risks, especially over shorter durations.
Who Should Consider Investing in Zerodha’s Gold ETF FoF?
Zerodha’s Gold ETF FoF could be an attractive option for those who:
- Are looking for long-term capital growth.
- Want a convenient way to invest in gold without the responsibility of holding physical assets.
- Seek a hedge against inflation while diversifying their portfolio.
- Have a high risk tolerance, as gold’s value can fluctuate in the market.
This fund may also appeal to those planning to buy gold as a Dhanteras tradition, but who would prefer to approach gold investing from a financial perspective rather than a traditional, physical one.
Conclusion
Zerodha’s Gold ETF FoF NFO offers an opportunity for investors to participate in the gold market with ease and flexibility. It suits those looking for long-term exposure to gold and who appreciate the practical benefits of ETFs over direct gold ownership. As with any investment, understanding the risks and aligning the fund’s goals with your financial objectives is key. Always consult with an investment advisor if you’re considering this option, especially if this is your first time investing in a gold-based fund.
(Disclaimer: This article is intended for informational purposes only and does not constitute investment advice. Please consult a financial advisor before making any investment decisions.)
