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The smart way to invest in Gold

This year, Diwali, the festival of lights, will be celebrated from Oct 25 – Oct 29. People observe the festival by lighting lamps to drive away the shadows of evil spirits. They purchase gold, new clothes & electronics as a way of welcoming Goddess Lakshmi.

While traditionally people have been buying gold coins or jewellery, one can explore non-traditional ways of buying gold. One effective way to invest in gold is by buying the Equity & Gold smallcase. This smallcase invests in a combination of equity and gold exchange-traded funds (ETFs).

An ETF is a tradable instrument that tracks an index, a commodity, bonds, or a basket of assets like an index fund. ETFs are very similar to mutual funds, the main difference being they are listed on exchanges and trade just like stocks.

The Equity & Gold smallcase invests in large-cap companies using Nippon India ETF Nifty BeES. This ETF provides exposure to a diversified basket of large-cap stocks. Large-cap companies are usually well established and are best suited for long term wealth creation.

Nippon India ETF Gold BeEs provides exposure to gold. Gold is the best form of hedge against inflation and geopolitical uncertainties. Since the price of gold is negatively correlated with the price of the stock, the former is a very effective portfolio diversifier.

For instance, feeble economic outlook, trade war tension between USA and China as well as other geopolitical tensions have caused gold prices to surge in recent months. Gold price per 10gm has gone up from ₹32,002 at the start of the year to ₹38,063 this week, returning ~19% in the last 10 months. During the same time Nifty 500, which can be treated as a proxy for the stock market, has returned -3.05%.

The smallcase been gaining momentum over the previous 6 months and has returned 5.56% compared to Nifty returns of -1.28%.

The rise of ETFs

An ETF is a tradable instrument that tracks an index like Nifty/Sensex, a commodity like gold, bonds, or a basket of assets.

ETFs are very similar to mutual funds, the main difference being the former is listed on exchanges and trade just like stocks. It would be expensive for an investor to buy all the stocks of an index or impossible for him to buy a certain quantity of a commodity for a low amount, say ₹1,000. An ETF solves this problem by giving the investor access to many stocks across various industries or allows the investor to invest in a small quantity of the commodity at a reasonable price.

ETFs usually tend to have low expense ratios since they track an underlying index or commodity.

Learn more about ETFs here.

ETF smallcases

All Weather Investing: The All Weather Investing smallcase is a recession-proof long-term investment strategy. The smallcase, via exchange-traded funds (ETFs), invests in three different asset classes – equity, debt and gold. Investors can invest in the All Weather Investing smallcase regardless of market conditions. By investing part of the corpus in debt and gold instruments, the smallcase reduces fluctuation in the short-term, however, the equity component allows the smallcase to generate wealth steadily over the long-term.

Top 100 Stocks: The Top 100 stocks smallcase provides exposure to a diversified basket of large-cap stocks using ICICI Prudential Nifty ETF and Nippon India ETF Junior Bees. Large-cap companies are usually well established and are best suited for long-term wealth creation. Adding such stocks to the portfolio increases the stability of the portfolio as their stock prices are not very volatile. The smallcase weights the ETFs according to a proprietary algorithm that attempts to minimize the risk of the smallcase.

Equity & Gold: The Equity and Gold smallcase invests in a combination of equity and gold exchange-traded funds (ETFs). The smallcase invests in large-cap companies using Nippon India ETF Nifty BeES.

Markets update

Benchmark indices remained range bound and ended the week marginally lower in red. Nifty closed down 0.67% 11,583.90 and Sensex closed down 0.61% at 39,058.1.

India has risen 14 places in the World Bank’s latest “Ease of Doing Business” global rankings. The ‘Doing Business 2020’ report, released on Thursday, ranked India at 63rd position against 77th last year.

Muhurat trading is a special trading session that is conducted by NSE and BSE to mark the auspicious occasion of Diwali. It is usually held for an hour on the day of Lakshmi Puja. The broking community performs Lakshmi Puja and trades during this period. This year it will be held from 6.15 pm to 7.15 pm on Sunday, October 27 (today), 2019.

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Naveen K R @https://twitter.com/naveen_khadri

Investment Associate at smallcase Research.

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Tags: all weather investing dhanteras diwali equity equity & gold ETF gold index funds large-cap nifty nippon sensex top 100 stocks

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