Is DSP World Gold Fund worth investing in?
Gold has been one of the best-performing assets in 2020. On a year-till-date (YTD) basis, it has given returns of 42.41 per cent. This has not just benefited mutual funds investing in gold or gold exchange-traded funds (ETF) but also gold mining companies around the world. Having said, if you have exposure to gold funds or if you have invested in gold mining companies, then indeed your portfolio would be shining.
DSP World Gold Fund is one such fund that has exposure to gold mining companies. It is basically an overseas fund of funds (FoF) that predominantly invests in BlackRock Funds-World Gold Fund as the latter invests in gold mining companies.
Performance
|
Trailing Returns (in per cent)
|
|
Particulars
|
YTD
|
6 Months
|
1 Year
|
3 Years
|
5 Years
|
10 Years
|
|
DSP World Gold Fund
|
55.19
|
57.40
|
63.87
|
24.22
|
23.18
|
3.60
|
|
BlackRock Funds - World Gold Fund
|
24.22
|
24.22
|
36.75
|
11.87
|
12.14
|
-2.43
|
|
FTSE Gold Mines Index
|
27.24
|
27.24
|
44.21
|
19.01
|
17.31
|
-3.28
|
From the above table, we can see that on a trailing basis, DSP World Gold Fund is outperforming its underlying fund (BlackRock Funds - World Gold Fund) and its benchmark as well. However, the point is whether or not it stands tall against gold ETFs?
Note: Aditya Birla Sun Life Gold ETF has been taken just for illustration purposes.
From the above net asset value (NAV) graph, we can see that in the long-term, gold ETFs performed better than the DSP World Gold Fund. Even in terms of volatility, it seems to be less volatile than DSP World Gold Fund. Also, DSP World Gold Fund, being a FoF, its expense ratio would be quite higher than that of gold ETFs. Further, investment in gold mining companies is like investing in a theme. As presently, demand for gold is surging, so is the gold mining stocks. Once the demand for gold starts to moderate and plunge, even these stocks would change its direction. Hence, investing in such funds cautiously would be prudent.