Sovereign Gold Bonds: A Golden Investment Opportunity For Investors

By: Jay Patel | 13 October, 2020

There are many reasons for buying gold. Gold acts as a hedge against inflation. It is a relatively stable investment compared with equities and other volatile assets. It is a good diversification strategy. Previously, Gold can be bought either physically or through ETF and Mutual funds. But now, SGB can be purchased easily and with add on benefits as compared to physical gold at your leisure.

What is Sovereign Gold Bonds (SGB’s)?

SGBs are government securities denominated in grams of gold. They are substitutes for holding physical gold. Investors have to pay the issue price in cash and the bonds will be redeemed in cash on maturity. The Bond is issued by Reserve Bank on behalf of the Government of India. Sovereign Gold Bonds are a great investment opportunity to invest in gold. Let me explain to you 11 golden reasons on why you should invest in SGB's:

1. SGBs carry a fixed interest rate of 2.50% per annum on the amount of the initial investment. Interest is credited semi-annually to the bank account of the investor.

2. You can easily purchase SGBs online through Investmentor Securities and hold the bonds in Demat form.

3. SGB prices are linked to the price of gold of 999 purity published by India Bullion & Jewellers Association (IBJA).

4. Investing in SGBs eliminates the risk of theft and the cost of storage.

5. Investors are assured of the market value of gold at the time of maturity and periodical interest.

6. SGBs are free from issues like making charges and purity associated with the purchase of gold in jewellery form.

7. These bonds are tradeable on exchanges.

8. SGBs have a tenure of eight years, early encashment/redemption of the bonds is allowed after the fifth year.

9. Interest on SGBs is taxable but the capital gains tax arising on redemption of the bonds is exempted for individuals.

10. SGBs can be used as collateral for loans.

11. Sovereign gold bonds carry the sovereign guarantee as these are issued by the Reserve Bank of India on behalf of the Government of India.