Ask Readers: Who Should Invest in Reliance Gold Savings Fund

Recently I wrote on Reliance Gold Savings Fund – should you invest?  I think I invited a storm by writing that. The article received lots of comments with different perspectives. People who shared their views included Financial Advisors, Mutual Fund Employees, day traders & investors. What a day to launch the NFO – 14th Feb (Valentines’ day) creating love in mind of investors 😉

Before taking my shots over the other comments, I am raising two most important questions and my views over them.

Q1. Should you invest in Reliance Gold Savings NFO?

Ask Readers: Who Should Invest in Reliance Gold Savings Fund 1Without keeping any suspense answer is a BIG NO. This not only applies to Reliance Gold Savings NFO, but to all Mutual Fund NFOs. One should never invest in Mutual Fund New Fund Offer for few reasons:

  • Saves you from getting in herd mentality. Take the time out and go back to your asset allocation to check if the fund offers you something unique and worth allocating your money.
  • Gives you time to analyze that is it right investment for me to achieve my goals. Lot of people will just invest because this is investment in “Gold” lot of will invest just because it is “Reliance” & few other because it is “SIP”.
  • May be in first 2-3 months you come across some hidden thing in the product.
  • Few more reasons like we don’t know the future of kid when he is just born, sometimes fund charges get reduced after NFO etc.

So my suggestion is don’t invest in Reliance Gold Savings New Fund Offer now as this is an open-ended scheme so you don’t lose anything by not investing now.

Q2. Who should invest in Reliance Gold Savings Fund?

Now I am not talking about NFO I am talking about when this fund will re-open for fresh purchase.

Even after reading my last article people asked me through mail & comments “Advise me on the investment in this scheme.” My answer is it depends – every investment instrument is not good for everyone.

So I am throwing this question to all readers “Who Should Invest in Reliance Gold Savings Fund?” You can analyze yourself & tell whether you should or should not invest in this fund for any particular reason. (Even you can imagine a person & tell he should invest in this scheme or not – if you are a MF advisor it is for you to relate with profile of investor)

Our last article on Reliance Gold Savings Fund also got published in Business Bhaskar. (Click here to read Full article before interpreting anything from title)

Ask Readers: Who Should Invest in Reliance Gold Savings Fund 2You should also keep in mind there are few more investment instruments to put your money in gold than Reliance Gold Saving Fund like:

  • Exchange Traded Fund (ETF)
  • E-Gold
  • Coins & Bars
  • Golden Harvest Scheme from Tanishq

So here are my views on few of the comments at earlier article on Reliance Gold Saving Fund (first read this) – don’t feel offended just sharing what I feel:

1. Mutual Fund Advisor Said “It’s sure that I am going to log in more than 25 SIP applications of Reliance Gold Saving Fund on opening day itself…..” I don’t think he is doing right to his investors or any of the advisors who is promoting any of the MF New Fund Offer. They should give time to investors to think wise rather than thinking of closing date. The pressure to get into “number game” is indirectly a pressure on the investors, who trust you so much.

2. One AMC guy said “I emphasize appropriate asset allocation to my clients ” Do people really understand what is asset allocation – if YES they will already be having gold in their portfolio & if NO people are using this term to mis-sell Reliance Gold Savings Fund to them.

3. One MF advisor said “gold will touch $1800 in 3 years & also added it will not go below Rs 16000”. Someone wrote “gold prices are going to crash now” who are we do decide gold prices. Let’s understand our limitations as the prive of a commodity is guided by N number of reasons. Do not invest by taking a call on prices, rather invest if you like the asset and feel will enrich your portfolio.

4. Someone said “its not investment, its just saving towards a defined goal to be met in future.” I would like to ask is there any relevance of colour of money? If Next year RBI decide to change green color Rs 500 note to black colour (Oh! this will create problem how we will differentiate which is black money & which is BLACK MONEY. PJ) let’s say blue color will it change something significant. Still it will be able to buy goods or services worth Rs 500 if there is no inflation. If idea is just to save for some particular goal (even if it is of buying jewellery after 15 years) why not invest in instrument which can fetch better returns. That’s the power of money – if our goal is to buy Mercedes after 10 years we don’t keep buying tyres this month & gears next month and keeping them in garage.

5. Someone Said “I was planning to go for 5 micro Sip of 200/- each for different dates in a month (to get the best avg rate/month) and let it continue for 15 years.” Let me ask is SIP only way to invest? Undoubtedly SIP is the best way to invest but again is it the only way to invest? Your parents achieved all their goals without even listening to this term. Coming to his point – You are investing for 15 years and than too caring for monthly volatility. This is a big myth what he is thinking “5 micro Sip of 200/- each for different dates in a month (to get the best avg rate/month)”. In long term this strategy will not be having any impact. This will just create lot of confusions in your bank account & mutual fund statement.

Warren Buffett said “You are neither right nor wrong because the crowd disagrees with you. You are right because your data and reasoning are right.”

Waiting for your comment & answer on – Who should invest in Reliance Gold Savings Fund?

25 COMMENTS

  1. Hemant Bhai,

    All big and typical problems have simple solution. One should invest in RGSF if:

    1) His portfolio has scope for gold investment as per his asset allocation. If he is maintaining a 20% gold and has already allocated for it no need to go for this scheme. This scheme will not give you returns of equity or other asset class.
    2) If you wish to invest in gold and do not have access to demat/sharebroker, you can take this easy route.
    3) If you plan to invest a low sum every month say Rs 100 to Rs 500 pm, this is a better easy option to invest.
    4) This fund shall be a better investment in comparison to physical gold purchased from the local market, thru jewellers.

    Since you said imagine yourself and answer…. well in that case my answer is NO. This is because I already invest 20% of my monthly savings in the Tanishq Golden Harvest Scheme and every year purchase a piece of jewellery for my spouse. I have a daughter of 5 years and till she grows, my spouse enjoys the jewllery and may be later we will exchange for new designs and gift them to our daughter. So, my family enjoys this saving unlike the other inevstments which we shall enjoy after they get mature in years to come. I M LOVING IT.

  2. Hi Hemant,

    Nice one.

    I also believe with increase in liquidity through ETFs and higher returns generated by this asset class (17%) , the objective has changed for investments.The comparison is now drawn between equity and gold returns which i feel is not correct.And so we hardly look at product insight now when we invest.I meet so many investors who compare gold returns in last two years with equities and it takes a lot to make them understand the difference between two asset class.
    Also i m training Financial Advisors on business enhancement and they are selling the product without understanding the real pros and cons.And what motivates them to convince investors is high returns from this asset class.
    What r ur views?

    • Thanks Jitendra for sharing insight.

      “People Don’t look for advice… they only search for someone to agree with them” and here agents make a killing “yes sir this is very good.”

      Even I am coaching Mutual Fund Advisors from last 6-7 years & feel the same thing that you have mentioned.

      I believe if someone is going down the wrong road, he doesn’t need motivation to speed him up, he needs education to turn him around. That’s what I am trying to do here. Yes sometime I write harsh comments but I think doctors sometime needs to give injection rather than sweet pills.

  3. wonderful, your articluation and analysis on Gold as an asset class and especially on gold mutual funs scheme. A wise investor can decide immediately on reading your article.

    I am going to do a blogpost on gold today or tommorrow. Would appreciate if you can share all this and proper links for my blog visitors.
    You may send your links to me at gmail

  4. Dear Hemant,

    I was about to fill the form of RGSF but after reading this article i think i should opt for ETF instead of RGSF.

    Can you please brief me out regarding ETF as i m intrested in investing my money in ETF for long term and also tell me which ETF should i buy….

    thanks a lot for this article has certainly saved my money…..

  5. Excellent analysis.
    As usual.
    Hemant you are spot on yet again.
    But, Hemant, don’t you think that if an investor wants a Gold exposure, then investing through sips in Reliance Gold Savings Fund will actually help him get the benefit of Rupee Cost Averaging and even out the FOF Expenses???

  6. Bang on target, Hemant.
    Excellent analysis, as usual.
    Dear Hemant, don’t you think that for an investor who WANTS a Gold Exposure, investing through sips in Reliance Gold Savings Fund works out considering the Rupee Cost Averaging benefit??

  7. Hi Hemant,

    Looking at long term returns (10 to 15 years) is ETF is better option than RGSF? I have a demat account.

    Gopi

  8. Hi Hemant
    I would like to share my experience.I invested Rs 20000 lumpsum and opted for a SIP of Rs 2000 per month when this fund was launched.I was motivated by the following factors.
    I have practically no physical gold.
    I have no demat account.
    I have a daughter who will get married after a few years.
    However when I checked my account statement recently I found that no SIP had been registered.So I had to give another application for SIP registration.

  9. Thanks for the auspicious writeup. It if truth be told was a leisure account it. Glance complicated to far introduced agreeable from you! By the way, how can we keep up a correspondence?

  10. Hi Hemant,

    I have a daughter of 4 yr and no physical gold for saving ..My monthly salary is 20 K and i can invest 500-1000 Rs pm for a long term for her education or marriage..Kindly advise where i can invest ..Plz guide me i will be highly thankful to you.

    • Savi,

      For long term goals equity investment is the best. You can start investing in mutual funds via SIP. If you are new to the MFs you can start with a balanced fund like HDFC balanced or HDFC prudence.
      But understanding MFs and monitoring them regularly is equally important.

  11. i have invested in sip reliance gold saving fund 1000/-per month from last three years, current value of my money is less, suggest i continue or withdraw the money.

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