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Sovereign Gold Bond Scheme – Should you invest?

Let us see if we should invest in current Sovereign Gold Bond scheme. What are the Pros and Cons in investing in Gold via Sovereign Gold Bond Scheme.

Please find the details of latest Sovereign Gold Bond Scheme 2021-22 – Series IV.

Issue NameSovereign Gold Bonds Scheme 2021-22 – Series IV (Tranche 53)
SymbolSGB212204
ISININ0020210111
Issue PeriodMonday, July 12 to Friday, July 16, 2021
Issue PriceOnline BID: Rs. 4,757 per gram
Offline BID : Rs. 4,807 per gram
Minimum Quantity1 gram & in multiples of 1 gram
Maximum QuantityThe maximum limit of subscribed shall be 4 KG for individual, 4 Kg for HUF and 20 Kg for trusts and similar entities per fiscal (April-March).
Rate of Interest2.50% per annum on the amount of initial investment. It shall commence from the date of its issue and is payable every 6 months.
Date of AllotmentJuly 20, 2021

Why invest in Gold

Asset allocation is one of the proven ways of managing our portfolio and avoid putting all eggs in single basket. Since equity is best asset for long term returns, people tend to invest more and more in it based on returns.

However Equity asset class is very volatile and can give large negative returns in few years. In order to safeguard overall portfolio health, we need another asset class which is negatively co related with Equity.

Negative co relation means generally asset prices move somewhat is opposite directions. Past history has shown Gold price do increase when Equity falls. This helps provide some cushion to your overall portfolio value.

Another reason is craze for Gold is still high in India. If you wish to gift gold to your daughter or daughter in law during marriage, you may like to invest in it.


How much to invest in Gold asset

Generally expert suggest 5-10% of your portfolio should be in gold. However such low exposure may not give appropriate hedging to portfolio.

You may like to read more on this to understand how to arrive at appropriate asset allocation by reading article (click on link).


Ways to Invest in Gold

Now, let’s see pros and cons of investing via Sovereign Gold Bonds.


Advantages of Investing in Gold using Sovereign Gold Bond Scheme


Dis advantages of Investing in Gold using Sovereign Gold Bond Scheme


Conclusion

Sovereign Gold Bond is excellent way to invest in Gold provided you are okay with lock-in. It is most tax efficient approach if you hold on to it for full tenure.

You get the returns of gold without any worry of theft or defaulting. It also pays interest half yearly which is not much but still should be counted over and above gold returns.

With current scheme valued at 4757/- per gram, we will be investing almost around 10% lower than highs gold touch so looks a reasonable price from long term perspective.

Also Gold is more for us as hedging asset to safeguard against Equity asset class. Based on asset allocation, you may consider this option provided you are okay with lock-in period.

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