All About Sovereign Gold Bond Scheme

Divya Nair

24 Oct 2016

If you are one of them who consider gold as a necessary investment, gold bond is for you. Gold bonds have all the qualities of gold investment except for shine of gold. These are backed by the government of India and undoubtedly are very secure.

What Are Sovereign Gold Bonds?

Sovereign Gold Bonds (SGB) are substitutes for holding physical gold. These are issued by Reserve Bank Of India (RBI) on behalf of government of India. When people invest in gold bonds, they get a paper against their investment instead of a gold coin or a gold bar. Sovereign Gold Bonds are also available in digital and demat form, and can be used as collateral for loans and can be sold or traded on stock exchanges.

Next Tranche Of Sovereign Gold Bonds From October 24

Government of India is launching Sovereign Gold Bonds 2016-17 - Series III from October 24 - November 2, 2016 for subscription. The bonds will be issued on November 17, 2016. In the sixth tranche of the gold bond, people can buy securities worth up to 500 grams.

The bonds will be sold through banks, Stock Holding Corporation of India Limited (SHCIL), designated post offices and stock exchanges; NSE and BSE.

Features Of Sovereign Gold Bonds 2016-17 - Series III:

Maximum Limit:

The maximum amount subscribed by an entity will not be more than 500 grams per person per fiscal year (April-March). A self-declaration to this effect will be obtained.

Eligibility For Investment:

Gold bonds will be restricted for sale to resident Indian entities including individuals, HUFs, Trusts, Universities and Charitable Institutions.

Tenure

The tenure of the bond will be for a period of 8 years with exit option from 5th year to be exercised on the interest payment dates.

Joint Holder

In case of joint holding, the investment limit of 500 grams will be applied to the first applicant only.

Issue Price

Price of bond will be fixed in Indian Rupees on the basis of simple average of closing price of gold of 999 purity published by the India Bullion and Jewellers Association Limited for the week (Monday to Friday) preceding the subscription period. The issue price of the Gold Bonds will be ' 50 per gram less than the nominal value.

Payment Option

Payment for the Bonds will be through cash payment (upto a maximum of Rs. 20,000) or demand draft or cheque or electronic banking.

Redemption Price

The redemption price will be in Indian Rupees based on previous week's (Monday-Friday) simple average of closing price of gold of 999 purity published by IBJA.

Interest Rate

The investors will be compensated at a fixed rate of 2.50%/annum payable semi-annually on the nominal value of investment.

Benefits Of Investing In Gold Bonds:

Available both in demat and paper form

  • Value of your investment in gold bond increases with the increase in gold prices

  • Gold bond gives a better return than the physical gold as it gives interest as well

  • No worries about safekeeping as a gold bond can be kept in digital form

  • No expense of locker as gold bond can be kept in house or demat account

  • Nil chances of cheating or impurities in gold bond. Investors would always get 100% pure gold bond, which may 100% value

  • Bonds can be used as collateral for loans


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Why to Choose Mutual Funds Instead of Directly Investing Into Equities?

Whether to invest in equities or mutual funds is a question that has plagued every investor. As someone who needs the best value for his/her investment should you invest in equity directly or via mutual funds?

Let’s start by first understanding what these two terms ‘equities’ and ‘mutual funds’ stand for-

Equities- Equities generally represent ownership of a company. If you own any equity in a company, you are a part owner of the said company (depending on how much equity you own).

Mutual Funds – It is an investment scheme which is professionally managed by an asset management company. It pools together the resources of a group of people and invests their money in equities, debentures, bonds and other securities.

Why choose mutual funds over equities?

For people who’ve never invested in either stocks or mutual funds, it is hard to know which is better and where to start. Broadly speaking, if you are a novice investor, mutual funds are not only less risky but also way easier to manage. Here are some ways in which investing in mutual funds is beneficial as opposed to investing in equities -

Diversification

Mutual funds provide more diversification as compared to an individual equity stock. When you invest in equity, you are investing in a single company which has its inherent risk. For example, if you invest Rs.20,000 in buying equities of one company, you could face a total loss if that particular company performs poorly in the market.  

If you invest the same amount in mutual funds, it will be invested in different kinds of stocks and financial instruments, high-risk and low-risk both, so you might not face total loss even if one company does poorly.

Scale of Investment and Lower Costs

For an individual investor buying and selling stocks is a difficult task due to its high price. Thus, any gains made from stock appreciation are nullified if the overall trading costs are considered. Comparatively with mutual funds, as the money is pooled from a large number of investors, the cost per individual is lowered.  

Another advantage of mutual funds is that you don’t need to invest large sums of money. Buying equities for a profitable venture needs huge amounts of money, a minimum of few lakhs. With mutual funds, you can start with Rs.1000 and earn profits on that as well.

Convenience

Keeping an eye on the markets everyday is a time-consuming business, especially if you are investing as a side gig. There are people who spend their lives studying the market and still end up sustaining heavy losses. Though investing in mutual funds does not guarantee high returns, it is stress-free and needs less work as compared to investing in equities.

To sum it up

It is important to remember that mutual funds have their own disadvantages as well. Thus, as with any financial decision, educating yourself and understanding the suitability of all the available options is the ideal way to invest. 


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All About Sovereign Gold Bond Scheme

Divya Nair

24 Oct 2016

If you are one of them who consider gold as a necessary investment, gold bond is for you. Gold bonds have all the qualities of gold investment except for shine of gold. These are backed by the government of India and undoubtedly are very secure.

What Are Sovereign Gold Bonds?

Sovereign Gold Bonds (SGB) are substitutes for holding physical gold. These are issued by Reserve Bank Of India (RBI) on behalf of government of India. When people invest in gold bonds, they get a paper against their investment instead of a gold coin or a gold bar. Sovereign Gold Bonds are also available in digital and demat form, and can be used as collateral for loans and can be sold or traded on stock exchanges.

Next Tranche Of Sovereign Gold Bonds From October 24

Government of India is launching Sovereign Gold Bonds 2016-17 - Series III from October 24 - November 2, 2016 for subscription. The bonds will be issued on November 17, 2016. In the sixth tranche of the gold bond, people can buy securities worth up to 500 grams.

The bonds will be sold through banks, Stock Holding Corporation of India Limited (SHCIL), designated post offices and stock exchanges; NSE and BSE.

Features Of Sovereign Gold Bonds 2016-17 - Series III:

Maximum Limit:

The maximum amount subscribed by an entity will not be more than 500 grams per person per fiscal year (April-March). A self-declaration to this effect will be obtained.

Eligibility For Investment:

Gold bonds will be restricted for sale to resident Indian entities including individuals, HUFs, Trusts, Universities and Charitable Institutions.

Tenure

The tenure of the bond will be for a period of 8 years with exit option from 5th year to be exercised on the interest payment dates.

Joint Holder

In case of joint holding, the investment limit of 500 grams will be applied to the first applicant only.

Issue Price

Price of bond will be fixed in Indian Rupees on the basis of simple average of closing price of gold of 999 purity published by the India Bullion and Jewellers Association Limited for the week (Monday to Friday) preceding the subscription period. The issue price of the Gold Bonds will be ' 50 per gram less than the nominal value.

Payment Option

Payment for the Bonds will be through cash payment (upto a maximum of Rs. 20,000) or demand draft or cheque or electronic banking.

Redemption Price

The redemption price will be in Indian Rupees based on previous week's (Monday-Friday) simple average of closing price of gold of 999 purity published by IBJA.

Interest Rate

The investors will be compensated at a fixed rate of 2.50%/annum payable semi-annually on the nominal value of investment.

Benefits Of Investing In Gold Bonds:

Available both in demat and paper form

  • Value of your investment in gold bond increases with the increase in gold prices

  • Gold bond gives a better return than the physical gold as it gives interest as well

  • No worries about safekeeping as a gold bond can be kept in digital form

  • No expense of locker as gold bond can be kept in house or demat account

  • Nil chances of cheating or impurities in gold bond. Investors would always get 100% pure gold bond, which may 100% value

  • Bonds can be used as collateral for loans