Over 1-mth,gold ETFs beat MFs,Sensex

Check the comparative gains by gold ETFs against stocks and mutual funds.

Gold has been a top-of-the-mind attention seeker for some time now. The recent flip-flops by the markets,mutual funds and commodities like gold and silver highlight,for investors,the crucial importance of one aspect diversification. That means never limit exposure to just stocks or mutual funds,but to also invest a small part of your money in bullion,PPF or even bank FDIs so that risk is reduced and in fact becomes manageable.

Take a look at gold ETFs,the standard investors vehicle for exposure to the yellow metal. As an investment gold ETFs history,stretching over the year,is not very exciting.

There are seven gold ETF companies in India Gold Benchmark ETF,Kotak Gold ETF,Quantum Gold,Reliance Gold ETF,Religare Gold ETF,SBI Gold ETS and UTI Gold ETF and their returns are just above 22 per cent over the one year period 8211; all ETFs have almost the same returns.

That means an investment of Rs 100 will have transformed into Rs 122 over a span of 12 months.

That kind of a return ranks gold ETF returns below those of most of the mutual fund pantheon,while Nifty and Sensex have given returns of almost 38 per cent each.

Amongst mutual funds,equity pharma category has given the highest return of 102 per cent,while equity diversified category is at half of that.

The case for gold therefore is weak for the 1-year period.

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But if you look at Gold ETF returns over the last 3-month period,then the returns fall even further to just above 9 per cent,but in contrast,the other mutual fund categories have plunged phenomenally.

That has powered gold ETFs to the third rank,with just Equity Banking and Equity Pharma,above it 8211; they have returns of 13 per cent for the period. Sensex returns are at just 2.5 per cent and Nifty at 3 per cent.

In short,the lesson for investors is that they must have exposure to a variety of investment options as the diversification will prevent their gains to plunge in a major manner if the exposure is limited to just a few investment options.

In case you are interested,then the returns of gold ETFs over the 1-month period are even worse,at 8.98 per cent. But,gold ETFs have even then generated the best returns of them all,much higher than all other investment options on the market,including Sensex,whose returns are at -4.3 per cent,Nifty at -3.85 per cent,while Equity Diversified fund category is at 1.99 per cent. The best equity fund categories are Equity Banking at 3.9 per cent and Equity FMCG at 1.64 per cent!