Sovereign gold bonds (SGBs), public provident funds (PPFs) and bank fixed deposits (FDs) are widely recognized as safe investment options. Deciding which one to choose can be somewhat difficult, as both of these options offer stable long-term investment vehicles.
Sovereign gold bonds are issued by the Reserve Bank of India on behalf of the Government of India. These bonds can be purchased in multiples of grams of gold, the base unit is 1 gram, and the minimum investment allowed is 1 gram. Investors in gold sovereign bonds receive an annual interest rate of 2.50%. These bonds have a maturity period of 8 years with an option to exit after 5 years.
“Given the eight-year holding period, sovereign gold bonds have several advantages over PPF and fixed deposits,” said Puneet Maheshwari, Director, Upstox.
The price of gold adjusts to reflect inflation over time. Additionally, the interest paid by the RBI is guaranteed and there are tax benefits as there is no capital gains tax, making it an excellent option for investors looking for stability and growth in their portfolio, says Puneet Maheshwari. added.
“Sovereign Gold Bonds (SGBs) are an ideal investment vehicle for long-term investors who want to stay invested for five to eight years. One of the big advantages is that there is no tax on capital gains when invested. “SGB is held until maturity. Apart from this, SGB offers an additional guaranteed annual interest rate of 2.50% until maturity, offering returns greater than gold. These benefits are unique to SGB, It is not available in any other form of gold investment,” Pankaj Shrestha said. – Head of Investment Services at Prabhudas Lilladher Pvt. Ltd. is based on Sovereign Gold Bonds (SBG).
SGBs have become a more attractive investment option due to the removal of long-term capital gains (LTCG) benefits from gold ETFs and gold mutual funds. April 1, 2023, he added.
Gold acts as a safe haven within the asset class. Experts recommend allocating 5% to 10% of your portfolio to gold, as it acts as a hedge against the volatility experienced in the stock market. Gurmeet Singh Chawla, Director, Master Capital Services, said: “Investing in Sovereign Gold Bonds (SGBs) is the perfect choice for individuals seeking exposure to gold over an eight-year investment horizon.” said.
Historically, it has delivered satisfactory returns. For example, the SGB 2016 Series I, which matures on February 8, 2024, provided investors with an XIRR of 13.6%, or an impressive absolute return of 163%, according to a director at Master Capital Services Ltd. Ta.
Advantages of investing in SGB
1) Investing in SGB helps diversify your portfolio.
2) Backed by the Reserve Bank of India, these gold bonds enjoy high credibility.
3) We offer attractive return rates
4) SGB increases in value as the gold price increases, so the principal increases.
5) Furthermore, the interest earned on SGB is exempt from income tax.
1) It takes 15 years for PPF account to mature.
2) Interest rates may change quarterly.
3) The maximum amount that can be deposited into your PPF account is set at Rs. 15,000.In the past few years, the government has not increased this limit
1) According to Amit Gupta Fixed deposits are considered to be a safe investment, but there is always a risk of banks going bankrupt. If this occurs, you may lose all or part of your investment.
2) Even after accounting for taxes, the return on your investment should ideally exceed the rate of inflation. However, term deposit interest rates generally tend to be lower than the inflation rate in most circumstances.
3) Interest on term deposits is taxable income.
Another disadvantage of fixed deposits is that the interest rate is determined at the time of application.
4) The disadvantage of investing in fixed deposits is that the interest rate on fixed deposits is fixed and usually lower than the returns offered by other investment options.
Start subscribing to SGB Tranche 2023-24 Series IV
The five-day application period for the latest tranche of Sovereign Gold Bonds (SGB) 2023-24 Series IV opened on February 12th. Investors can take advantage of this opportunity to invest in gold until February 16, 2024.
Subscription period: February 12th to February 16th, 2024 (5 days)
date of issue: February 21, 2024
Issue price: Rs. 6,213 per gram of gold
Disclaimer: The views and recommendations expressed above are those of individual analysts and not of Mint. We recommend checking with a certified professional before making any investment decisions.
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