When you hear the word ‘bond’, what comes to your mind?
Sean Connery the best bond! Although, the savings bond is not much bad either; with de-materialization coming in.
We often find ourselves in the “ Lendee” position, the one needing to borrow money. But how would you like to be the Lender to the government? Charging interest and receiving payments whilst having your money being lent to the best borrower in the world, the government. Financial experts advise having 5% to 10% of the portfolio allocated in gold.
If you wish to invest in gold you should invest gold electronically instead of investing physically. Investing in physical gold has various drawbacks such as storage cost, fear of theft, etc. You can invest in gold electronically through a gold mutual fund, gold ETF, or Sovereign Gold Bond (SGB).
Let’s have a look at the features of SGB
1. SGBs are issued in denominations of one gram of gold and multiples thereof.
2. The maturity period of the sovereign gold bond is eight years.
3. However, early redemption is allowed from the fifth year onwards.
4. After completing five years of investment, you can trade them on the Stock Exchange
5. Only RBI can issue SGBs on behalf of the Central Government. Investors will receive a holding certificate for their gold bond investment. Furthermore, one can also convert it to a Demat Form.
6. Can be used as collateral for loans.
7. The price of Sovereign Gold Bonds is fixed on the basis of a simple average of the closing price of gold of 999 purity, published by the India Bullion and Jewellers Association Limited for the last three working days of the week preceding the subscription period.
Sovereign Gold Bond Benefits:
1. Uncertainty likes Gold
Historic data proves that uncertainty drives more inflows in gold. Gold has never failed to show its resilience when in a correction. When used correctly bonds can actually function as a middle ground between the safety of cash and the wild volatile stocks.
2. Safety of Capital
These bonds are backed by the government and are highly liquid. Therefore, Sovereign Gold Bonds entail the least risk and can be used as collateral to avail loans.
Physical gold comes with high premiums, GST loss (of 3%), purity threat, and security charges.
Vis-à-vis the underrated investment avenue of Sovereign Gold Bonds or E-gold does not attract these costs.
4. Start investing with just 1-gram gold
The minimum size of investment is 1 gram, which costs approximately around ₹5147.
5. Timely returns
You will receive 2.5% interest per annum on the invested amount given out half-yearly over and above the capital gain.
6. Tax implications
Gold is a great diversifier and adds a good store of value to the portfolio. However, this asset class shouldn’t just be acted on occasions of Dhanteras and Akshay Tritiya, Physical gold comes at a huge mark-up, and the prices are not recovered while selling it.
Sovereign Gold Bonds has been an underrated way of saving. This is one of the best ways to beat inflation and cover the downside. With minimum transaction costs, it eliminates the headache of paperwork and storage.
There’s no golden gun to investing, but bonds are no exception. If you are hoping to make more than what your savings account offers you and the wildly volatile stock market scares you. Then, bonds might be just what you are looking for.
Get in touch with us to buy SGB by filling out this form: https://forms.gle/WHW8u6gXk9qh2A3C8
You can also visit the LXME app and look out for LXME Rs.100 Gold Savings Plan through which you can invest with as little amount as Rs.100. This fund invests in Gold through Gold ETF providing better liquidity and no risk on the purity of gold. This portfolio is well-researched and curated by experts.
Never say never again to sovereign gold bonds.
Smart Money Uncategorized February 21, 2024
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