There is considerable action in the other non- fund category, namely, . There are two kinds of -related funds in India. One is the so-called , which act as proxies for holding in physical form. Fund companies that run invest all of the ’ in . Thus, the invested in such funds makes or exactly in line with the price of , after charging around 1 per cent per annum as .

In the year or so since the first ETF was launched these funds’ number has grown to five with few more in the pipeline. For a fund type, they’ve proven reasonably popular and hold of Rs 550 crore. However, when one compares these funds to the amount of that is traded in the , this is a pittance. However, it’s the other kind of fund that is having a more interesting time. These are funds that invest in the of mining, refining and companies abroad.

Currently, there’s only one fund of this kind-DSP Merrill Lynch’s World Fund but another one from AIG is on offer right now and there’s at least one from Tata Mutual Fund that is in the regulatory approval stage.

While prices have always had their and downs over the years and in many Asian cultures have always liked to have their hoard of as hedge against bad times, it has been a since anyone has considered it as an alternatives to like . This appears to have changed. has had an amazing run over the last , earning returns of about 300 per cent. Still, this can’t the fact that over the long term, hasn’t been a great investment.

Even at the prices, on international prices has gained at an average 4 per cent per year over the last hundred years. Adjusted for , this is a mere 0.6 per cent a year. Does in or mining funds make sense now? According to those who are pitching for , we are in an unusual time when a combination of factors will probably make appreciate. Demand may stay and the supply will not really expand. After all, this is one of the scarcest materials on . The total amount of ever mined in the world can into a box that is 64 feet by 64 feet by 64 feet.

What does all this mean? Looking beyond the of as an investment, the actual issue is the chasing of past performance that we all tend to do. may do well or it may do badly. But the way to make in in was to have realized back in 2001 that was at a historic low and then to have started buying it gradually.

To suddenly become a when the price has already run up more sharply than it has for a generation is folly indeed. may have given returns of 40 per cent over two years, but the last time it did such a thing was perhaps in the mid to late . Do you really want to take a call on whether such a thing is sustainable? Whether it’s or it’s or funds, what has already happened is generally not a great guide to what’s going to happen. won’t be an exception to this rule. as a small holding-perhaps five per cent of one’s is fine, but it can’t be anyone’s main investment.

The sensex dipped 20% in 3 months but have given over 25% returns. It’s time to look at for safe

WITH THE on a downhill trek, a wave of panic has gripped the retail . In these uncertain times, you may have also found yourself struggling, and sometimes worried, on how to get the right portfolio mix and avoid the bear’s claws. The same stands true for many, who ran out of his wits after his year-long eroded in a matter of few seconds. If analysts are to be believed, in such turbulent phases, you can always look up to as an not only as against the choppy but for better returns as well.

THE GOLDEN SCENARIO

With an expected slower US growth momentum, Fed easing, a weakening , rising and heightened geopolitical concerns, prices appear to be firmly supported in the months . Strong demand coupled with strong jewellery demand from Asia and the Middle East is also likely to push the prices. In the present context, is expected to provide better capital appreciation, provided it is bought at a right price. It is also a good hedge against

Strong fundamentals put aside, has also given a return of 18% in the first two months of 2008. Today, it is the most - asset and is actually playing the role of in the ’s portfolio.

THE ETF ROUTE

Analysts feel that in the present market conditions is expected to provide better capital appreciation. While the sensex has fallen more than 20% in the last , () have given returns of over 25%. “If you’re looking for as an investment then it is better to invest through instead of holding physically.

It has a triple :

1) held via ETF would be treated as a long-term asset in one year whereas you’ll have to hold the physical for three years to classify it as long-term.

2) There is no wealth attached and if you hold it in demat form

3) There are no issues about its purity.

FUNDS

If you’re bullish about and other , it can be an interesting move to buy a mutual fund scheme which in turn invests in the shares of mining companies of , silver and .

If you invest through an ETF, it is kept for three years and the amount of backing remains the same (it does not grow). However, in those three years, a mining company could have increased in the , could have given and achieved higher valuation () on of corporate actions (like mergers, acquisitions).

in a fund would more as with the increase in prices, the of mining companies increase manifold on of operating . Launched in 2007 in India, DSP ML Fund has given a return of over 60% in last six months.

GLITTER EFFECT

According to analysts, though is expected to provide very good returns this year, it would also come with higher . So before you plan to invest in or funds, it is pertinent that you should get an outlook of and crude price behavior, physical demand for in the and performance of equity . The entry time is very important while in . One should consider the seasonal pattern such as seasons. Analysts that if you don’t understand the dynamics of the , avoid buying through because when the price goes against your position (price falls after you have bought) then you have to give the difference (known as marked-to-market) immediately to the .

Today, all major have 3-15% of their portfolio in , and as of now it looks like an opportune time to on the precious metal. And exercising a bit of will only add glitter to your .

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