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Future of Mutual Fund Industry in India

Why Invest in Gold?

Historically, gold has been a proven method of preserving value when a national currency was losing value. If your investments are valued in a depreciating currency, allocating a portion to gold assets is similar to a financial insurance policy. In the past year, the climb in the price of gold above $700 per ounce is due to many factors, one being that the dollar is losing value.

Reasons favoring to invest to Gold

*
The dollar is weak and getting weaker due to national economic policies which don't appear to have an end.

* Gold price appreciation makes up for lost interest, especially in a bull market.

* The last four years are the beginning of a major bull move similar to the 70's when gold moved from $38 to over $800.

* Central banks in several countries have stated their intent to increase their gold holdings instead of selling.

* All gold funds are in a long term uptrend with bullion, most recently setting new all-time highs.

* The trend of commodity prices to increase is relative to gold price increases.

* Worldwide gold production is not matching consumption. The price will go up with demand.

* Most gold consumption is done in India and China and their demand is increasing with their increase in national wealth.

* Several gold funds reached all-time highs in 2006 and are still trending upward.

* The short position held by hedged gold funds is being methodically reduced.

Gold Mutual funds - A relatively safe method of buying and owning gold stocks allows the owner to diversify among many stocks and allows the investing decisions to be made by a professional. Investment methods vary among funds and provide many different styles of portfolio management for an investor to choose from. Prices move faster and further in both directions than the price of gold.

* Provide professional management and diversification within the gold sector.

* Are more volatile than the S&P index.

* May or may not have any correlation with the general market.

* Move daily with the price of gold, but not always.

* Move proportionally more than gold, up and down.

* If you believe in 'buy low, sell high', gold is still low, but climbing.

The real estate sector and the road ahead

Real Estate Mutual Funds ('REMFs')

The SEBI Board has now approved the guidelines for the much awaited Real Estate Mutual Funds. "Real Estate Mutual Fund Scheme" is defined to mean a scheme of a mutual fund which has investment objective to invest directly or indirectly in real estate property.

Governing Law

It is proposed that REMFs will be governed by the provisions and guidelines issued under SEBI (Mutual Funds) Regulations. REMFs, shall initially, be close ended. The units of REMFs shall be compulsorily listed on the Stock Exchanges and Net Asset Value (NAV) of the scheme shall be declared daily.

Custodian

The REMFs would be required to appoint a Custodian who has been granted a Certificate of Registration to carry on the business of Custodian of securities by the SEBI Board. The custodian would safe keep the title of real estate properties held by the REMFs.

Investment Criterion:

It is proposed that REMFs could invest in the following: -

* Directly in real estate properties within India;

* Mortgage (housing lease) backed securities;

* Equity shares / Bonds / Debentures of listed / unlisted companies which deal in properties and also undertake property development; and in

* Other securities

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Category Shares & Stock, Other Articles by - Rahul Tibrewal 



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