Gold ETF | Advantages & Disadvantages

Advantages of Gold ETF:

• First, Gold ETFs allow you to invest in gold even if you have a small investible surplus. Instead of waiting until you accumulate enough funds to buy a 50 gm gold bar, you can make an investments in gold ETFs with an outlay of just Rs 10,000, to start with.

• Second, You can also gradually build your exposures by buying additional units as and when you can afford them. Second, you can phase out your investments in a Gold ETF over a period of several months or years, so that you do not invest lump sum at a single price.

• Third, when you take the ETF route, you can invest in gold without worrying about the purity issues that usually dog jewelery purchases.

• Finally, because you can liquidate your ETF units at NAV-based prices through the stock market, they may offer better liquidity at prices closer to the market than gold bars or jewelery.

Disadvantages of Gold ETF:

• One, returns on Gold ETFs may be lower than those on physical gold by virtue of management fees, transaction costs and other operational expenses levied by the fund house on the fund's NAV.

• Second, if the ETF units are not actively traded in the stock market, you may not be in a position to exit your holdings at the time or price of your choice.

Solutions:

• However, these risks appear unlikely to play out in practice. Competition between different ETF products may ensure that these products generate returns that are pretty close to those generated by physical gold.

• The problems associated with liquidity may be sorted out if the idea of Gold ETFs really catches on with investors.

Exchange Traded Funds | Advantages & Disadvantages

Exchange traded funds (ETFs) are a popular among investors nowadays.
These investment vehicles are similar to index funds, except they are traded as stocks on the stock market.

Here are advantages and disadvantages of investing in ETFs

Advantages

1. Convenience
Investing in ETFs are as easy as investing in stocks. You just need to buy one as you would buy any regular stock.

2. Low fees
Like index fund, ETFs have low fees. You can expect the management fee to be about .1% for S&P 500 trackers like IVV and SPY.

3. Tax efficient
There are no unexpected capital gains/losses when you purchase an ETF. Sell when tax-wise it makes the most sense to you.

Disadvantages

1. Convenience
The ease of buying/selling an ETF means you might sell an ETF when you later believed you should have held on. Of course, solid investment discipline will avoid this disadvantage.

2. Market spread
If you are buying a rare ETF, the buy/ask spread might be somewhat significant. This can be avoided if you invest in the major ETFs.

3. Index fund disadvantages
Since you gain the advantages of an index fund (like low fees), you also receive most of the disadvantages as well. Because an ETF blindly follows an index, it means it holds shares of stocks you might not like that happen to be in that index.

Telecom towers, huge power guzzlers too

With about 2.5 lakh towers powering mobile services to over 400 million subscribers, the telecom industry is now the second largest consumer of energy in the country.

According to industry estimates, each tower consumes 3-5 kW to run the air-conditioner, generators and other equipment required to keep the base station in operation.

“The entire ICT industry accounts for 1.5 per cent of India’s total energy bill. This is expected to go up to 2.7 per cent by 2020. That makes it the second largest consumer of energy. Of this, telecom infrastructure accounts for one-third of the consumption while running IT equipment accounts for half,” says Mr Ankit Tandon, Company Strategist, Acme Tele Power.

High consumption also means high cost for infrastructure companies and mobile operators. “Most of the towers in rural areas are run on diesel gensets since there is no regular supply of power. Even in urban areas, there are frequent power cuts and we have to use as much as 5-10 litres of diesel a day,” said a mobile operator.

Telecom companies are adopting a multi-pronged strategy to reduce energy cost.

Infrastructure sharing has cut down power consumption in a major way. A single base station requires about 3 kW for uninterrupted service. So, if three operators were to set up their own towers to load up the base stations, it would require 9 kW. However, since operators are sharing the infrastructure by loading up their base stations on a single tower, they need only about 5 kW.

Operators are also using renewable sources such as solar and wind to power the base stations. “Though this is more costly in terms of capital expenditure, it gives lower operational expenditure,” said Mr Tandon.

Operators have sought incentives from the Government to promote use of renewable sources of energy.

Since air-conditioning is the major reason for high power consumption at tower sites, operators are also deploying systems that keep air cool without compressors.

Home loans up to Rs 10 lakh get 1% interest rate subsidy

Affordable housing, especially in non-metros, could get a much-needed boost with the Government on Thursday approving the one per cent interest subvention scheme for housing loans up to Rs 10 lakh. The Centre has allocated Rs 1,000 crore for the scheme.

Under the new scheme approved by the Cabinet, the interest subsidy will be made available through commercial banks and housing finance companies for construction/purchase of a new house or extension of an existing one. This will be allowed so long as the cost per housing unit does not exceed Rs 20 lakh. The move augurs well for the sector as it comes at a time when there has been a notable slide in the flow of credit to the sector. This was largely on account of increase in real estate prices, slackening of income growth, and rise in interest rate for home loans — all of which have brought home sales to a near standstill since late last year.

The sop will be available only for the first twelve instalments for loans sanctioned and disbursed in the twelve months running from the date of publication of the scheme.

Also, the one per cent subsidy will be computed for 12 months on disbursed amount, and adjusted upfront in the principal outstanding irrespective of whether the loan is taken on fixed or floating rate basis.

On a housing loan of Rs 10 lakh, the interest relief will amount to Rs 10,000 per account, an official release said. As such, the scheme of a size of Rs 1,000 crore is expected to cover 10 lakh beneficiaries in one-year period.

Meanwhile, Mr S. Sridhar, Chairman, National Housing Bank (NHB) — the designated nodal agency for this scheme — told Business Line that the scheme will help improve sentiment in the housing sector, especially those in the non-metros.

“A home loan borrower will be encouraged to take a decision. The developers can also quickly get their act together to increase the supply of affordable housing,” Mr Sridhar said. Developers such as DLF and Unitech said that the scheme would “galvanise” buying sentiments. Clearly, it would benefit buyers in tier-II and tier-III cities as also affordable housing projects that are now coming up in the suburbs of major cities. But, it may not be of much benefit to buyers in prime locations of metros where the ticket sizes tend to be over Rs 20 lakh.

“Nearly, 50-60 per cent of potential home buyers belong to the low cost housing category. So, the scheme is a welcome step and would benefit buyers in smaller cities and suburban locations”, Mr Pradeep Jain, Chairman of Parsvnath Developers, said.

Source: Business Line