Gold ETF to merge or keep diversified

POSTED BY Gaurav Doshi ON May 17, 2013 4:37 pm COMMENTS (10)

Hi Friends,

In my D-Mat portfolio I have 3 Gold ETFs – all trading negative.

Fund                 Buying price         Today’s price      % Loss

Goldbees           2737                    2484                  -9.3%

HDFCGold          2692                    2590                  -3.8%

KotalGold           2660                    2510                 -5.6%

 

At present the Rs.value loss is around Rs.7000 (cummulative).

Mathematically speaking is it a good idea to sell my ETFs of hdfc and kotak and invest that amount into Goldbees. If I do so then my average buying price of Golbess Rs.2737 would come down to Rs.2533. Hence even if the gold jumps over a period of time making the profit could be bit faster.

Look forward to your advice on this averaging logic of mine.

Thanks,

Gaurav

10 replies on this article “Gold ETF to merge or keep diversified”

  1. Gaurav Doshi says:

    Thank you Ramesh & Ashal.
    I get the point you are trying to explain.

  2. Dear Gaurav, if 6months to 1Y is long term to you, May God save you. Coming back to your original discussion. how can you cut back your losses by redeeming from high NAV gold ETF & reinvesting in low NAV gold ETF.

    Your reply/query is reminding me the old days of NFO phobia – Sir 10. Rs. NAV is cheaper than 100 Rs. NAV.

    Can you pick something from my above comment?

    Thanks

    Ashal

  3. Gaurav Doshi says:

    @Bharat – there is a point i see that on selling apart from the cost there would be additional expenses.

    @ Ashal – not sure about gold rally but expecting in long term may be 6months or 1year the gold somewhere would should positive signs.

    @ Ramesh – Total 7000 rs. is cummulative loss.
    Eg. if I have 1 unit of each etf. Then if sell hdfc and kotak then i get around 5000 Rs with a loss of around 500 Rs.
    Then using this 5000 Rs. I can buy 2 units of Goldbees. When I buy 2 units of the goldbees at 2484 then my current buying average of goldbees would become around 2555 for 3 units from existing buying price of Rs.2737. So next time when gold (if) moves up will be better spcope of recovering faster.

    Guess I am complicating the things for myself.
    Thanks
    Gaurav

    1. Ramesh says:

      Wouldn’t you already have Locked your loss by doing so ?
      Say gold reaches back 3k after 1 year.
      Case 1: calculate your total investment and the gain/loss, if you don’t do this jugglery.
      Case 2: do the same after you have changed it.
      In my opinion, there would be no difference.

  4. Dear Gaurav, sorry for the typo error in the prev. reply. the correct one is –

    Are yopu sure about Gold rally from current Gold prices?

    Thanks

    Ashal

  5. bharat shah says:

    what i suggest, you may check the gain(loss) of all gold etf units for any period on site like valueresearchonline.com , and you find the gain(loss) of all gold etf would be same (with negligible difference) .so switching to other gold etf will not benefit .on the contrary , you will loose something as exit load, and tax (as long term ,or short term). for switching to E-gold , your future benefit would mostly depend over the movement of gold , but i personally think, the expenses to hold would be less compared to gold etf units, particularly if you are gathering gold for future use (not for sale). or if you have to buy 100gm or so, it may be better to have physical gold. these are my personal views , and many may differ it.

  6. Dear Gaurav, are you sure about Gold rally from current rally?

    Thanks

    Ashal

  7. Gaurav Doshi says:

    Thank you Bharat for the information that 1unit may not be equal to 1gm.

    But I am looking purely from point of view of averaging and getting my profits in terms of Rupee value back or mnimise my rupee losses over a period of time.

    Or one more option could be to sell all the gold ETFs book the loss of Rs.7000 and then buy E-gold from National Spot Exchange.

    Thanks,
    Gaurav

    1. Ramesh says:

      Can you explain the mathematics behind?

      The more you trade, more will be your loss.

  8. bharat shah says:

    ‘Mathematically speaking is it a good idea to sell my ETFs of hdfc and kotak and invest that amount into Goldbees. If I do so then my average buying price of Golbess Rs.2737 would come down to Rs.2533.’
    your thinking seems wrong. as all AMC’s gold etf units are not underlying exactly 1 gm gold or any fixed weight of gold. even of the same AMC’s gold etf unit is underlying decreasing weight of gold as the time passes. this is because , at start of the scheme, though it is underlying @1gm of gold, its i.e. AMC’s expenses are eating its weight at rate of @1% p.a. so you find the older AMC’s gold etf unit is generally cheaper than newer ones. of course , the liquidity is also affecting the price a little.

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