Add shine to your portfolio the MF way!

As the festive season draws near, we rush to buy gold and silver on auspicious days. But instead of buying physical gold and silver and storing it ourselves, is there another convenient and efficient alternative? Yes, there is!

You can invest in gold and silver through mutual funds (MFs) as well! For example, when you invest in HDFC Gold Exchange Traded Fund or HDFC Gold Fund, your funds are invested in physical gold bars with purity of 99.5% fineness or above^! It is a similar case with silver. With investments in HDFC Silver ETF or HDFC Silver ETF Fund of Fund, your funds are invested in physical silver bars with purity of 99.9% fineness or above^. Thus by investing in gold and silver through the ETF or Fund of Fund (FoF%) route, investors do not have to deal with the hassle of storing the metals or worry about the purity. We store the precious metals in custody, while you enjoy the convenience of transacting easily!

^Complies with Good Delivery norms as specified by SEBI Regulations. HDFC Gold and Silver Fund of Fund investors also enjoy this feature as the FoF invests in respective ETF units

% A demat account is not needed to invest in FoFs

Improved taxation post latest Union Budget

Investing in gold and silver through mutual funds has become more beneficial with the taxation changes announced in the latest Union Budget in July 2024. For units of gold and silver ETFs and FoFs acquired on or after April 01, 2023, a 12.5%* Long Term Capital Gains (LTCG) rate (> 12 months holding period for ETFs, > 24 months holding period for FoFs) would be applicable if redeemed after March 31, 2025.

Further, gold ETFs now have a shorter holding period of 12 months to become eligible for LTCG, compared to physical gold where the holding period is 24 months#. This is an additional reason for investors to consider buying gold ETFs (which hold in custody physical gold on behalf of investors) vs. investors purchasing and storing physical gold themselves.

Source: India Budget.

*Surcharge and Health & Education Cess as applicable.

#The information set out is neither a complete disclosure of every material fact of the Income-tax Act, 1961 nor does it constitute tax or legal advice. Investors should be aware that the fiscal rules/ tax laws may change and there can be no guarantee that the current tax position may continue indefinitely. In view of the individual nature of the tax consequences, each investor is advised to consult his/ her own professional tax advisor.

Enjoy the liquidity advantage when investing through the MF route

Lastly, investing in gold and silver through mutual funds gives investors the advantage of easy liquidity vs. owning physical bars themselves. Weekend Bytes | October 2024 3/5 Improved taxation post latest Union Budget Investors can buy/sell ETF units on the stock exchange each trading day. FoF investors can also invest / redeem units on a daily basis, just as they would with a normal mutual fund scheme. These transactions can be done effortlessly with the click of a button!

Gold and silver offer diversification and balance against portfolio volatility

While we tend to purchase gold and silver during the festive period for auspicious reasons, it is worth recalling other reasons why one should consider investing in gold and silver. Gold is considered to balance portfolios against the volatility of other asset classes. It could also serve as a buffer against currency depreciation and geopolitical shocks. Similar to gold, silver also offers the benefits of portfolio diversification and buffer against currency depreciation. Interestingly, silver also has considerable use as an industrial metal in new age technologies including Electric Vehicles (EVs) and solar panels. These factors make silver a potential attractive investment.

To conclude, investing in gold and silver through mutual funds provides numerous advantages to investors – investment in physical gold and silver bars of high purity with no hassle of physical storage, convenience of transacting, easy liquidity and the ability to invest in small amounts regularly through Systematic Investment Plan (SIP) ~.

~ Investors can set up SIPs into ETFs as most brokers allow this feature

Note: Investors in HDFC Silver ETF Fund of Fund and HDFC Gold Fund shall bear the recurring expenses of the Scheme in addition to the recurring expenses of the respective underlying Schemes (subject to regulatory limits).

HDFC Asset Management Company Limited has been managing equity Index Solutions for over 20 years. Index Solutions also include passively managed fund of funds and commodity(ies) based schemes.

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