Feeling Restricted in Buying Physical Gold? Here’s What You Can Do
Everyone who is looking for a haven investment that will last for generations to come should be investing in an SGB. In the long run, this yellow metal can be a superior investment choice to mutual funds. This is because if the bond is held till maturity, there are no capital gain taxes levied in this investment.
The fact that it is issued by the RBI also makes this investment vehicle investment-grade i.e., relatively immune to default. Another point to note is the natural liquidity of this vehicle.
An SGB can be traded on the stock exchange as the bond will be available in Demat form. However, if an investor wants to hold the bond in physical form they can do so as well.
Another noteworthy point to mention is the fact that the bond can be used as collateral for loans. There are also indexation benefits that allow you to lower your long-term capital gains, hence bringing down your taxable income. However, these benefits are only applicable if the bond is transferred before maturity.
Speaking of Gold itself several economic indicators indicate that gold prices are going to shoot up. Some of those indicators include sticky inflation and the negative real yield on bonds.
There is generally an inverse relationship between bond yields and gold prices. Increasing trade wars is also a factor that can lead to a shoot up in the price of Gold.
Why Choose an SGB over Physical Gold?
The aim of issuing an SGB was to reduce the purchase of physical gold which is technically a dead investment and shift domestic savings into financial savings. This is a step towards stimulating the economy of the country. It also relieves you of the hassle of storing physical gold.
Is investing in an SGB the right choice for you? Find out.
SGB is an ideal choice for someone with a long-term horizon. The reason for this is that an SGB also provides a 2.5% interest on an annual basis. The interest is taxed at the applicable tax rates.
The tenor of the bond is 8 years with a lock-in of 5 years. However, if you’re a short-term investor, Gold ETFs and mutual funds might be the right choice. Investing in Gold can also provide diversification to your portfolio.
It is also a suitable investment choice during periods of economic instability, a situation we are facing right now. For an average investor, a minimum investment of 10% of their portfolio in Gold is the ideal choice.
How Swastika Can Guide You?
Here at Swastika, we don’t recommend schemes based solely on their returns. We analyze an investor's belief and constraints before investing.
We genuinely believe that a Sovereign Gold bond will reduce the risk of your portfolio. In these turbulent times managing risk has become the need of the hour. A portfolio should be combined with both risky and riskless assets.
However, most investors just invest in stocks because of their popularity. Adding an SGB to your portfolio can immensely reduce the risk and provide diversification.
However, we would like to mention that this vehicle is not entirely risk-free. There is a risk of capital loss if the market price of gold declines due to some unforeseen circumstances.
But rest assured that the investor does not lose in terms of the units of gold that have been allotted to them. Noting the fact that there is a risk, it is minimal and negligible which is why we urge you to invest in Gold today.
We summarize the 8 Golden reasons to invest in Gold:
- Provides a 2.5% interest on an annual basis
- No capital gains tax on maturity
- No storage costs
- Assured quality
- Provides diversification to your portfolio
- Cheaper than physical Gold
- Rs. 50 discount for those investors who invest online
- Minimum subscription is set at 1 gram and maximum at 4 kgs for individuals. However, Trusts and other similar entities can invest up to 20kgs.
The popularity and the increased inflow of investment in this vehicle have not stopped. It is increasing its pace with every tranche.
Think Fast and Invest NOW
The Sovereign Gold bond scheme of 2021-22 will be issued in six tranches. The first three tranches are currently closed for the subscription. Don’t delay and miss this incredible investment opportunity. Invest in SGB today.
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