Investment Options in Gold

Here are four possible investment options in Gold

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  1. Jewellery

Most popular and easy to buy, this is the most inefficient gold investment. When you buy jewels you not only pay for the gold, but also pay making charges and the manufacturing wastages incurred by the gold smith, besides the taxes. Also, jewellery is normally made out of less pure and the deteriorating quality of the gold. Another concern is that physical gold requires security (greater risk).


  1. Gold coins / Gold biscuits

Available with many banks like ICICI, BoI, SBI etc for sale with a premium of about 10% in sealed packages. It is certified by the authority and hence there is no worry about the purity. You may be able to sell them back to the bank or any other trader at the prevailing market price with no premium of course. Security concern is also applicable in this case.


  1. Gold funds

Mutual funds invest in commodity gold / related industry scripts. This is an indirect paper trade similar to any other mutual fund. You buy units of Rs.10 each and the fund will invest in companies who are into gold and related commodities. There is no need to monitor the gold price (the fund manager's headache!) with a service cost of about 6 %.


  1. Exchange traded funds - Gold BEES / Kotak BEES

This is the best bet for a cost effective investment. Gold Bees is listed in the stock exchanges (like any other stock) and traded on a daily basis. It tracks the gold price closely within a margin of +/- 1 %. The advantage of this fund is the liquidity (lots of buying and selling) of the asset, so you can buy or sell the gold in units of 1 gram. Pre-requisite is that you may need a Demat and trading account with a broker. No hassles about the purity of the gold or the wastages involved!

Investment in Real Estate, NEXT WEEK.



Falling market - black monday, terrible tuesday, may be a wonderful wednesday

Dear new investors
Do not miss this golden opportunity because the time is right enter the market. If you already have a demat and trading account then just jump over and start buying: also identify your target profit to sell.

No special skill is required to identify the good ones.
Just look at some of the big shots in the business
  1. Reliance six pack : R-industries, R-communication, R-energy, R-petro, R-natural resources, R-capital (also R-power)
  2. Tata pack - T-motors, T-telecommunication, T-tea, T-steel
  3. Bank pack- SBI, ICICI, Canara B, B of India, Corporation B, B of Baroda, Yes B, HDFC B, Kotak B
  4. Infrastructure - GMR, IVRCL, Maytas, Gammon, L & T, IDFC, Hindustan construction
  5. Capital goods ABB, BHEL, BEL, BEML, Seimens, Voltas
  6. Telecommunication - Bharati, Idea
But if you haven't opened demat and trading accounts (but have a PAN card) you need not get disappointed. The Plan-B reap dividends is: - invest in MUTUAL FUNDS. Just walk into any of the state banks and ask for
  1. Magnum mutual fund application - you can select from midcap, multicap, commodities, technology, fmcg, service, infrastructure, taxgain of any sector specific fund or any other open equity funds. (more about mutual funds soon!)
Please keep sufficient numbers of copies of the PAN card / application details and the number of cheque leaves and a good black pen to fill up the form and sign.

If you are still not convinced, read the following article of Udayan Mukerjee (posted in Moneycontrol portal). Many thanks to his matured advice always appreciated by Thangam and me (we never miss his evening sessions on the market analysis!).

Here goes,
The thing about life is that one makes mistakes. Many mistakes were made in the second half of 2007 and those sins have to be washed away by blood, such is the way of financial markets. Some participants will go down under and never be able to get back to the market again but most will survive. The pain will linger for many months, maybe years but lessons have to be learnt. Every such debacle has lessons for us and the sooner we forget them the more we suffer. The first lesson is not to let stock price performance become the sole reason for buying, a mistake which was made in abundance in the last 3 months. What couldn't be explained by fundamentals was credited to liquidity. The present lost all relevance as people chose to focus on the distant future, perhaps simply because the present could never justify those ticker prices; only a hazy dream of the future could. Traders and investors had no time for fundamental analysts, in many cases they were labelled "cribbing fools". Chartists became the most celebrated tribe on the street as only they could see and predict the one way run to glory for many of the hot stocks even as fundamental watchers cringed at valuations....till the music stopped. Don't get me wrong, charts do work in trending markets but once stock prices veer away completely from fundamental value, people need to get careful. But they never are. Now that the blinkers are off, people should ask themselves why stocks like RNRL, Ispat, RPL, Essar oil and Nagarjuna fertilisers have lost 50-70% of their value. It is simply because their stock prices had snapped all connection with underlying business fundamentals, earnings and value. Their stock prices became the only reasons for buying them which works for a while but not forever. The other big lesson, one which should have been driven in earlier in May 2006, is the danger of overextending oneself in the futures market. The lure of stock futures is easy to understand. Put in some margin, take a big exposure on a fast moving stock, make a killing when prices shoot up. Repeat exercise. Just that people forgot that prices may also come down and at a pace which noone can even imagine, maybe their friendly stockbrokers forgot to tell them that part of the story. The result : unbridled speculation that ran into lakhs of crores, excesses that we are paying for today. Even this fall will not cure investors of their love for futures speculation but if at least some amount of caution is injected it would have been a worthwhile learning. Futures are not toys for amateurs, they are time bombs in the hands of inexpert and inexperienced traders, it's only a matter of when the fuse runs out. The other learning which I hope will play out in the future, as it has in the past, is that it pays to be brave in times of panic such as these. If I was allowed to invest myself , which I am not, I would have no hesitation in deploying serious money into the market today, knowing fully well that prices may fall more tomorrow. And I would be standing there tomorrow to buy more of the same, till my money ran out. India is going to be a terrific stock market story for many years to come, even an intermediate bearish patch cannot shake that conviction of mine. At best, one will have to wait a bit for the returns to follow. That's alright. You are happy to put money in a bank FD and then wait for one full year to collect that measly 8%, aren't you? Then why does the stock market need to give you 20% every month? In the last one year, I haven't seen so many good stocks trade at such mouth watering levels. Forget trading, avoid the duds which were fuelled up by operators, just go out and buy those bluechips. They will deliver, even if there is a global market meltdown for a while, and if you are a bit patient you will be rewarded. But do remember January 2008, as history will repeat itself again in the future. Just that our memories tend to be too short and our greed too much. Udayan Mukherjee

Reliance romance : Reliance Power IPO

'Guru' is back!

Dhirubhai Ambani started the equity cult in India more than 30 years ago. More than 58,000 investors, many from the great Indian middle-class (first time retail investors!), subscribed to Reliance's IPO in 1977. Greatly rewarded were these investors, and thus began their love affair with Reliance.


What is an IPO or Intial Public Offering?

It is the first sale of stock by a private company to the public. The company is giving 'stake' or part ownership to public, in the process raising funds. IPOs are often issued by younger companies seeking capital to expand. IPOs are also offered to institutional investors like foreign funding agencies.

Reliance Power, owned by Anil Dhirubhai Ambani, is the largest ever IPO subscribed in India. It is oversubscribed by more than 70 times i.e
number of shares company is offering = 260 million (10.1% of Reliance Power)
number of shares public is ready to buy > 18200 million!!


The IPO was fully subscribed 60 seconds after it opened Tuesday. The shares were priced at 405-450 rupees.

Many first time investors sought this opportunity to enter the equity market. Road side vendors, panwalas, petty-shop keepers, painters, rickshaw-walas and thousands of factory workers have applied for Reliance Power shares. Mumbai's famous dabbawalas handed out application forms with the lunchboxes.

Reliance Power is a unit of Reliance Energy. It is developing 13 medium and large power projects with a combined planned capacity of 28,200 megawatts. Reliance Power is yet to generate a single watt of energy. The first plant will not begin production until the end of 2009.