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What are Commodity Funds?
A commodity fund can be considered a mutual fund that involves investing in the trade of a particular commodity. An investor can earn through the returns of his investment. The commodity mutual funds India market is one of the fastest-growing markets. Goods that can be traded for one another or similar value are commodities. Some popular commodities are gold, tea, petroleum, coffee, etc. The ICICI commodities fund is an equity fund scheme from the ICICI prudential commodities fund direct plan growth. Trade and commerce is an essential part of our lives. Commodity funds in India let one participate indirectly through investing and achieving specific financial goals.
Types Commodity Funds In India
- Basic Commodity Fund
Commodity mutual funds India invests primarily in naturally occurring commodities, for example, metals.
- Index Funds
Index funds are passively managed. The fund manager buys the commodities based on the benchmark at standard rates.
- Future Funds
The name itself suggests the type of fund. It is a risky trade as the fund manager takes the call based on the commodity’s future. The NAV of this fund can increase or decrease suddenly, involving many risks attached to it.
- Natural Resources Funds
Natural resources like oil, mineral, gold, petroleum are traded, and investments are made.
ICICI Prudential Commodities Fund Direct Plan-Growth
ICICI prudential commodities fund provides comprehensive investment solutions. The investor centric policies and plans, along with the easy access, make the ICICI commodities fund experience unique. The gap between savings and investments is bridged with the growth plan. Experience of more than two decades is reflected strongly through fund management. More than 62 lakhs investors have invested in the ICICI commodities fund. With crores of asset value invested and diversified mutual fund schemes, new investment opportunities are getting added day by day.
Features of ICICI Commodities Fund
- The minimum purchase application amount is Rs. 5000.
- The minimum additional investment ranges to Rs. 1000.
- 1 % of the net asset value is applicable if the amount redeemed is invested up to three months from the allotted date and nil if the amount is invested for more than three months from the date of allotment.
- The minimum redemption amount can be anything.
- The indicative investment horizon is five years and above.
- The daily frequency for a systematic transfer plan is Rs. 250 and differs for weekly, monthly, quarterly periods.
Suitability and Investment Strategy
The ICICI commodities fund caters to narrow investment mandate companies. The fund was launched on 15 Oct 2019. According to experts, one should invest in Flexi-cap funds that allow fund managers to freely invest in companies it expects the maximum amount of gains. Investment through the SIP route is highly advisable. If one is likely to redeem the amount is less than five years, it is advisable not to invest.
The fundamental strategy with the investment is to create long term capital by portfolio creation. The portfolio invests in equity-related securities and commodity-related sectors.
Benefits of Commodity Funds
Flexible
The future of commodities can be used to fulfil short-term and long-term investment goals.
Risk
The risk of investing in the funds varies from commodity to commodity. These funds are not generally high risk, but global sanctions and political issues can stir things up.
Indirect
A commodity fund is an indirect method to get involved in the investment arena. Hence, an investor can focus on other aspects.
Fluctuation of Rates
The fluctuation of market rates is likely to affect the returns of the investment. The change in commodity demand and supply hampers the investment returns.
The popular commodity funds in India are Axis Gold Fund, Reliance Gold Savings, HDFC gold fund, SBI gold fund, IDBI gold fund, Kotak gold fund. They are not the best but the most popular depending on the current market subscriptions.
Conclusion
Before investing in commodity funds, it is essential to know about the commodity and market trends. An investor who has little investment knowledge can opt for commodity mutual funds. The risk involved is low in these investments. But investors who seek fixed growth or returns must stay away from investing in commodity funds. The ICICI prudential commodities fun belong to the thematic categories of funds. As per the latest guidelines produced by SEBI, it comes under the high-risk category.
As the disclaimer goes, mutual funds are related to market risks, and therefore one must read and understand that multiple factors are responsible for investment returns.
