Meezan Gold Fund 2023: Can It Safeguard Your Wealth?

Looking for a safe investment option in Pakistan? Check out our honest review of Meezan Gold Fund to make an informed decision about protecting your wealth in 2023.

Furqan Punjani

Apr 21, 2023

Mutual Funds

Meezan Gold Fund 2023: Can It Safeguard Your Wealth?

Thinking to invest in the Meezan Gold fund so that you can hedge against rupee depreciation while making returns if the gold prices go up? look no further – this is the guide for you!

Let’s talk about Gold first!

Why should anyone be looking to invest in gold today?

The stock market is lacklustre and going down almost every day

There is a risk of a further increase in interest rates which might lead to a further decline of stock prices

No visible signs to determine when will the fall in the rupee stop against the dollar

You:

Are concerned that your investment value will fall further

Don’t want to put in more money to average your investments

Understand that you are losing your hard-earned wealth in dollar terms

Don’t have enough money to buy a real estate

Are a filer

Given all this, what will you do?

Option 1:

Put all your money in a money market fund. But this approach lags behind when the dollar appreciates against the rupee. Think in dollar terms (for our dedicated ebook on this subject click here)

Option 2:

Buy dividend stocks with whatever money you have. It’s a very good option but given the consistent fall in the stock market and increasing interest rates, you don’t know at what rate you should jump in

Option 3:

If you already own stocks – liquidate them and keep the cash in a bank or in a money market fund. The bank is probably the worst option and as told before, money market funds lag inflation. You are losing out every day due to inflation

Option 4:

Buy dollars. It can be a good option since it will protect you from local inflation and hence rupee deprecation. But can you buy them for large sums of money? What about the tedious requirement of taking hard cash to an exchange company, giving them your CNIC copy, buying the dollar and storing it at your home or opening a dollar account. Isn’t it complicated and risky at the same time?

Option 5:

Buy gold. Again, the problem here is if you have a large sum of money, where would you store so much gold? Not in your house, I guess! Not to forget that the gold you buy from Sarafa Bazaar is actually going to turn your white money into black. Would you really want to do that?

So, what to do when all these options don’t seem to work?

What if we tell you that you have an option through which you can invest in real gold, have it at a secure place and make dollarized returns?

Yes, you read that right!!

The option is investing in gold through a mutual fund!

Let’s explore this option.

What is Meezan Gold Fund?

Meezan gold fund came into being in 2015 and since then has been offering investors a solution to all your gold problems (from buying it to keeping it). Through them, you can invest in gold and at the same time have a tax rebate on your investment.

Advantages of Meezan Gold Fund:

Dollarized Returns

Gold prices in Pakistan are derived from the dollar rate against the rupee. This way, that amount is protected from the rupee’s depreciation against the dollar

Bet on international gold prices

If you think international gold prices are on the rise, you will have the same return on your investment

Disadvantages of Meezan Gold Fund

Price risk

What if the gold prices in the international markets fall? There have been 5 instances since 2015 when gold has fallen more than 15%. Although most of the time it has come back up immediately, you need to keep this in mind.

Dilution

It’s not a 100% gold fund. See finding physical gold can become tough sometimes so to hedge the risk, Meezan Gold Fund is allowed to keep a maximum of 30% of their money in an Islamic bank deposit.

As of November 2021, they had 80.5% assets invested in Gold and the rest in deposits

This means that their return will lag behind if gold prices in the international markets go up. But it will also give you downside protection – lower losses if prices come down

Higher fee vs other funds

They charge higher fees. They will charge you a total of ~3%.

1% management fees which are lower than stock funds

But a 2% price adjustment charge (1% paid each time you invest or take out your money

So broadly speaking, if the returns are 10%, you will be effectively making 7% only!

Meezan Gold Fund historical performance:

According to their benchmark, MGF has done reasonably well.

In 2022, Meezan Gold Fund gave investors the highest return possible among all the mutual funds. Here is the link to the performance of all the mutual funds in 2022.

Having said all this, if you want the maximum returns and you can purchase it directly, you might want to look at physical gold. That has performed better than Meezan Gold Fund however so a salaried person, handing so much of cash might not be a good idea.

See the graph below

Should you invest in Meezan Gold Fund?

All in all, You should look at Meezan Gold Fund if you:

Want to diversify away from stocks

Don’t have large sums of money to buy real estate

Hedge yourself from the falling rupee against the dollar

Are a filer

Here is the link to Meezan Gold Fund’s website

As always, we are here to help you in case you have more queries on the product or fund. Email us at [email protected]

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