Gold Choose Bonds Not Jewellery
All That Glitters
In India, we look upon gold as an investment. For marriage, as a symbol of wealth, and as some kind of insurance. But is physical gold really a sound investment?
Physical Vs Sovereign Gold
Physical gold comes in the form or bars, coins and jewellery. Gold bonds are govt securities issued by the RBI and are denominated in gold, with each unit = 1 gram of gold.
To apply for SGBs, one can visit the branches of nationalised banks, scheduled private and foreign banks, authorised stock exchanges, Stock Holding Corporation of India Ltd.
SGBs: Investment Required
The minimum investment in these bonds is one gram, and the maximum is 4 kgs for individuals. There is a lock-in period of 5 years, and the issue rate is fixed by the govt.
Buying Physical Gold
Gold can be bought directly from any jeweller, without any broker or intermediary - so it’ free from counterparty risk. There is no limit to purchasing physical gold.
Physical Gold: Drawbacks
Carrying and storing gold is costly, and there is always a risk of theft. There are also high making charges. And for purchases above 30 lakh, buyers have to pay a wealth tax.
Benefits Of SGBs
SGBs are low risk, can be traded on the exchanges, come with an indexation benefit, and offer an annual interest rate of 2.5% twice a year, which works as an additional income source.
Considering the ease of purchase, tax benefits, interest and the fact that they are safer than physical gold, sovereign gold bonds are a better option from an investment standpoint.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.