Diversify Your Portfolio Wisely with Gold Investments

Considering a gold investment this festive season? Well, expert advice suggests a second thought. However, if you’re still keen on gold but want to steer clear of the physical stuff, consider alternatives. A standout choice? Sovereign Gold Bonds.

So, last year, I got this gold bangle. Now, thinking of selling it, I found out there’s a 25% capital gains tax. So, when I ask my mom, “Should I sell it?” And she gives me this weird look.

You know how we Indians are with gold, right? It’s like our thing. Even in tough times, selling physical gold feels like a big deal. It’s just how we are.

Investing in gold is a good move to mix things up in your money plan. But here’s the catch—how do you let go of this shiny stuff? Well, think about buying gold in e-format. It’s like a tech way to stay in the gold game without the emotional stuff.

What are Sovereign Gold Bonds?

Sovereign Gold Bonds are issued by RBI and guaranteed by the Central Government of India. Investors have to purchase bonds in cash, and they will be redeemed during maturity in cash which will be linked to gold price.  It will help investors to participate in the movement of gold prices without going through the hassles of buying and selling gold.

Why Choose It Over Other Digital Gold Alternatives?

Sovereign Gold Bonds come with some financial perks. In physical gold exchanges, you typically lose around 15-20% due to making charges every time you trade gold. On top of that, there are additional expenses for safety, insurance, and storage, even if you’re dealing with gold bars or coins. Now, you might be thinking about Gold ETFs—they are digitally traded through demat, but they come with transaction charges for both entry and exit, not to mention annual AMC charges.

Here’s where Sovereign Gold Bonds stand out: they not only spare you these extra costs but also pay you interest on your gold holdings. Unlike physical gold or Gold ETFs, where your income is uncertain unless the market price rises, Sovereign Gold Bonds offer a reliable 2.50% interest to investors.

Now, let’s talk flexibility. Although the maturity period is set at 8 years, you can redeem Sovereign Gold Bonds after the 5th year if needed.

And, there’s a sweet tax benefit too! The redemption after 8 years is entirely tax-free. But, be aware—if you sell it in the secondary market, capital gain taxes will apply at the current rates. Also, the interest on these bonds is taxable, just like regular interest receipts, at the applicable rate.

A Sovereign Gold Bond is demarcated as 24-carat gold.

Four Key Points to Consider When Investing in Sovereign Gold Bonds

1. Sovereign Gold Bonds serve as productive earning assets with a sovereign guarantee.
2. Gold, being a safe haven investment, experiences high demand during uncertainties. It tends to outperform other asset categories when there’s debasement in the value of fiat currencies, economic fluctuations, or geopolitical turmoil.
3. Typically, including 8-12% gold in your overall portfolio mix and long-term goals provides a safety net during uncertain times. Over the long run, it can contribute to creating wealth compared to the equity market.
4. It’s worth noting that Sovereign Gold Bonds aren’t available on a continuous “on-tap basis.” The Government of India opens specific windows for investors to buy, and it won’t be available throughout the year.

–Praveena Lakshmi, is a certified Content Writer and a Business Communication and Soft skill Trainer.