3 Factors Responsible For Outflows From Gold ETFs (2024)

Gold exchange Traded Funds (or gold ETFs) are one of the smart ways of investing in gold. They are bought and sold like stocks on a real-time basis as are listed and traded on a stock exchange. Each unit of gold ETF is equal to 1 gram of gold (for Quantum Gold Fund ETF, one unit is equal to 0.5 gram of gold), and are held in a demat account.

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In addition, there are other advantages of investing in gold ETF …

As per the latest data released by Association of Mutual Funds in India (AMFI), during the period April to October 2017, Rs 422 crore has been pulled out from 14 Gold ETFs. Moreover, trading in gold ETFs has been subdued.

3 Reasons for outflow from gold ETFs:

Even in the preceding financial years, gold ETFs have witnessed outflows: Rs 775 crore in 2016-17, Rs 903 in 2015-16, Rs 1,475 crore in 2014-15, and Rs 2,293 crore in 2013-14.

How different is the global trend?

A report published by the World Gold Council (WGC) highlights that globally too, gold ETF holdings are down. In fact, inflows have lagged 2016’s record levels. The reasons for this are:

European funds, however, are participating positively according to WGC, abetted by European Central Bank’s (ECB’s) negative rates to boost economic growth.

What should be your investment strategy?

Well, currently there are compelling reasons to invest in gold…

Recognising the systemic risk involved, even central banks across the world are not taking any chances. The global official reserves held by central banks and others rose 25% y-o-y to 111 tonnes in Q3’17 from 88.8 tonnes in Q3’16 according to WGC. Russia in particular, accounted for bulk of the purchases, with Kazakhstan and Turkey also increasing reserves. The RBI as on October 27, 2017 held Rs 1,388 billion as gold reserves as per the data published in its November 2017 bulletin.

So, be a smart investor and take refuge in gold recognising the uncertainty looming. During such times gold would continue to exhibit its trait of being a safe haven or astore of value.

Remember, the precious yellow metal as an asset class is an effective portfolio diversifier and a hedge. The long-term secular uptrend exhibited by gold, is something that invites attention and highlights the importance of owning gold in one’s portfolio with a longer investment horizon.

PersonalFN recommends allocating at least 10% of your entire portfolio to gold and keep a long term investment horizon; it will be a prudent strategy.

To know more on how to invest in gold smartly, watch this video:

Ever sincethe Government implemented the Goods and Service Tax (GST) regime on July 1, 2017, it has faced a tirade of issues and criticism from various stakeholders.

The new tax regime, also termed as the “Good and Simple” tax by PM Narendra Modi, fell short of the Government promises. The opposition termed it as “Gabbar Singh Tax”

Soon after the GST launch, consumers felt the pinch as the prices of several goods and services went up. As a result, consumer demand fell, leaving businesses in the lurch.

Apart from increased tax rates for certain goods and services, the new system had its own share of teething problems. Business owners found the GST filing process cumbersome and confusing. This further led to business disruption.

Even though the five GST slabs does away with several indirect taxes levied by the Centre, the new tax rates created certain anomalies in product pricing. To correct this, the GST Council made several revisions in GST rates for specific goods and services. But that was not enough. Businesses were hurt with the higher rates.

In the past, efforts were made to revise the tax slabs of certain products and add cess where required to correct anomalies. For example, cess was added to cigarettes and higher segment of cars, as the effective tax rates turned out to be lower than the pre-GST rates.

After repeated demand from trade unions, the Government has now resorted to appeasem*nt politics as many as four months later and just before the Gujarat assembly elections. The GST council reduced the rate of over 200 items, moving more than 80% of the items in the top 28% tax bracket to lower rates.

Further, the GST Council reduced the tax rate on all restaurants to 5% without Input Tax Credit. Five-star hotels will continue to attract the 28% GST rate. Consumer goods such as air-conditioners, refrigerators and washing machines will remain in the highest tax brackets.

To read more and how it makes an impact on your household budget, click here.

"XYZ is a great mutual fund scheme. It has delivered 35% returns in one year"

“It is a 5-star rated fund with supernormal returns over the past year”

These are phrases that are often used by commission-driven distributors to lure gullible investors. Sadly, investors blindly trust the superficial facts, without probing deeper.

Over the past year, small-caps have generated a return in excess of 30%. Mid-caps and multi-cap funds trailed behind with a return of around 25%. Large-caps, known for their steady returns, delivered about 20% over the year.

It is human tendency to trust products that have delivered spectacular past returns.

Several studies in international markets have found sufficient evidence to conclude that retail investors often chase returns. This is why top performing schemes or even top-rated schemes of the past three to five years attract strong investor inflows. Due to this,assets of top performing schemes have more than doubled over the past 12 months.

All it takes is that push distributors give, for investors to confidently put in more money, ignoring the underlying risks.
In the small-cap category,burgeoning fund size fuels a liquidity risk. Small-cap stocks, due to their size, usually have a low trading volume. Due to the risks associated which such stocks, buyers often disappear in an unforeseen event.

In such a situation, the fund manager may end up holding an illiquid stock or may have to sell the stock at a deep discount. At the end of it, your investment in the fund will take a beating.

To read more and to learn the important factors to select small-cap funds, click here.

Rohit met Rahul, his child-hood friend for lunch yesterday. Rahul is a well-known Architect in town and Rohit works for an Investment Bank. After hours of tête-à-tête on varied subjects, what kept them going was discussion about their retired life. They envisioned owning neighbouring bungalows at Andaman and leading a peaceful and serene life by the coast.

But there were some obvious questions:

“Will my retirement fund last till my last breath?”
“Is living a blissful life during golden years, really be possible?”

Rohit, being an investment banker, was smarter. He was saving adequately and investing; though was not sure if that would be enough for his retirement. He held life is unpredictable and always fearful about his future.

Has such questions bothering you too? Yes, click here to read on…

The Central Board of Trustees (CBT) of the Employees Provident Fund Organisation (EPFO) are scheduled to meet on November 23, 2017 to consider applying the 8.5% interest rate on your EPF account for the current financial year. If there is consensus on this rate, the subscriber, you will earn less interest compared to last year’s 8.65%, and 8.8% from the year before that, i.e. 2015-16.

To know the historical EPF rates since 1952 refer: http://epfindia.gov.in/site_docs/PDFs/MiscPDFs/InterestRate_OnPFAccumulationsSince1952.pdf

The diminishing interest rate scenario has prodded the EPFO to propose a lower interest rate.

However, if you consider the fact that the EPFO invests 15% of its corpus in equities through Exchange Traded Funds (ETFs), the total return earned could be almost be on par to last year’s earnings. This is because the Indian equity markets are in a high-spirited mood, and some companies when backed by corporate earnings are likely to declare decent dividends.

The CBT will also deliberate on crediting, your account, as the subscriber, with mutual fund-like units (which you can redeem/withdraw from the PF account).

Now, as per practice, the CBT’s decision is ratified by the Finance Ministry, after evaluating whether the EPFO will be able to achieve this endeavour or not. So, keep a watch on this news to ascertain the impact on your retirement kitty.

Download PersonalFN’s Guide to the Employees' Provident Fund. This Guide will answer all your queries on EPF.

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