Are you looking for the twin benefits of safety and returns? Do you seek investment in gold without storage hassles and making charges? You can invest in Sovereign Gold Bonds as a substitute for physical gold. It is a low-risk investment, and you may put money if you are a conservative investor. However, should you invest in Sovereign Gold Bonds?
What are Sovereign Gold Bonds?
Sovereign Gold Bonds are government securities denominated in grams of gold. You may subscribe to the scheme by bidding for a minimum of one gram of gold and in multiples thereof. It is an investment in paper gold and an effective way of holding gold in your portfolio.
You may find Sovereign Gold Bonds issued by the RBI on behalf of the Government of India. It is traded on stock exchanges, and the maximum subscription limit is 4 kg for individuals and HUF (Hindu Undivided Family). However, trusts may invest a maximum of 20 kg in Sovereign Gold Bonds.
You could subscribe to Sovereign Gold Bonds by paying the issue price in cash. However, the bonds are redeemed in cash on the maturity of the scheme. You earn a fixed interest rate of 2.5% per annum on your initial investment. You may subscribe to Sovereign Gold Bonds at post offices designated by the RBI, recognised stock exchanges, commercial banks and Stock Holding Corporation of India Limited (SHCIL).
Series-XII of the Sovereign Gold Bond Scheme opens for subscription today
You may subscribe to the Series-XII SGB (Sovereign Gold Bond) scheme 2020-21, from March 01, 2021. It is the twelfth and final tranche in Sovereign Gold Bonds for FY 2020-21 and remains open for subscription up to March 05, 2021. You could bid for a minimum of one gram of gold at Rs 4,662 per gram. You enjoy a discount of Rs 50 if you bid online and pay for the investment through digital mode.
You will earn an interest of 2.5% per annum on your initial investment from the date of issue of the Sovereign Gold Bond. It is credited semi-annually to your bank account with the final interest payable along with the principal amount on maturity of the Sovereign Gold Bond.
Sovereign Gold Bonds have a maturity period of eight years. However, you may exit the investment after the fifth year from the date of issue on the interest payment dates. You can trade Sovereign Gold Bonds on the stock exchanges such as BSE and NSE within a fortnight of the issuance.
Why invest in Sovereign Gold Bonds?
You may consider putting money in Sovereign Gold Bonds if you want assured returns of 2.5% per year payable semi-annually. You may also avoid the hassles of storage as compared to physical gold. Moreover, it is a liquid investment that is tradable on a stock exchange.
You can pledge Sovereign Gold Bonds as collateral for loans. It may help you tide over a financial emergency. You don’t incur making charges as compared to physical gold. Financial experts advise you to diversify your portfolio with 5%-10% of holdings in gold. You may consider Sovereign Gold Bonds if you can invest for the long-term.
You may find Sovereign Gold Bonds as an effective way of investing in gold for your portfolio. However, you should consider this investment only if you are a long-term investor. It eliminates storage costs, making charges and purity issues as compared to gold jewellery. In a nutshell, you get gold’s market value at maturity, and you also earn a periodic return on your investment.
For any clarifications/feedback on the topic, please contact the writer at cleyon.dsouza@cleartax.in
I write to make complicated financial topics, simple. Writing is my passion and I believe if you find the right words, it’s simple.
