Why Investing in The Ongoing Sovereign Gold Bond Issue Is Sensible?
There are two sets of people in this world.
Ones who are content with received wisdom on gold and others who strive to explore and see if something more is possible.
The most prevalent view is “Buy gold; it's your backstop in a crisis.” But, the view gaining currency is “Buy gold through bonds; it is worth more than its weight in gold.”
As we go
When constructing an investment portfolio, diversification is essential. While equity mutual funds can provide attractive returns, they are not without risk and should be approached cautiously.
A well-rounded portfolio includes a diverse range of asset classes that complement one another and help to reduce risk.
Diversification is what gold offers to your portfolio.
It is frequently regarded as a safe asset that outperforms during periods of economic uncertainty and market volatility.
You can stabilise your portfolio and potentially increase returns by including gold.
This article will examine why investing in the current Sovereign Gold Bond issue is a good idea.
The Role of Gold in Diversification
Gold has several characteristics that make it an excellent option for diversification:
- Safe Haven Asset
Investors seek refuge in safe assets like gold in economic crises or uncertainties. It serves as a value store and helps to stabilise portfolios during volatile market conditions. Gold's value tends to rise when other assets fall in value, making it an effective hedge against market volatility. - Low Correlation with Other Asset Classes
Gold's correlation with traditional asset classes, such as stocks and bonds, is low. This means that market fluctuations have less of an impact on its price movements. You can reduce overall risk and diversify your portfolio by including gold. - Protect Yourself Against Inflation
Gold has historically served as an inflation hedge. Currency values tend to fall when inflation rates rise. On the other hand, gold retains its purchasing power during inflationary periods, making it an appealing investment. - Stability During Market Volatility
Gold's performance is relatively stable compared to other investments during periods of market volatility. Its value does not depend on the performance of specific companies or economic indicators. Therefore, including gold in your portfolio can provide stability and protect against downturns.
Why You Must Buy Sovereign Gold Bonds
While physical gold purchases have been a traditional choice for investors, the ongoing Sovereign Gold Bond (SGB) issue offers several advantages:
- Convenience and Security
Investing in physical gold involves concerns about storage and security. However, with the Sovereign Gold Bond scheme, you can invest in gold without physical possession. This eliminates the hassle of storage and ensures the security of your investment. - Interest Income and Capital Appreciation
Sovereign Gold Bonds offer the unique advantage of generating interest income. The bonds carry a fixed interest rate, providing investors with regular returns.
Additionally, the bonds' value can appreciate based on the prevailing market price of gold, potentially increasing your overall returns. - Backed by the Government
Sovereign Gold Bonds are backed by the Government of India, making them a secure and reliable investment option. The government's guarantee adds an extra layer of trust to your investment.
Golden Hue to Your Portfolio
Given global economic uncertainty and rising inflation rates, diversifying your investment portfolio across asset classes is a prudent strategy. Many financial experts advise allocating 10% to 20% of your portfolio to gold investments.
Investing in gold, especially through the ongoing Sovereign Gold Bond Scheme 2023-24 Series I & II, offers a convenient and cost-effective way to add gold to your portfolio.
The fixed interest rate provided by the series makes it an attractive investment option.
FAQs about Sovereign Gold Bonds
How can I invest in Sovereign Gold Bonds?
You can invest in Sovereign Gold Bonds by applying through designated banks, brokers or online platforms during June 19-23, 2023 and September 11-15, 2023.
What is the tenure of Sovereign Gold Bonds?
Sovereign Gold Bonds have a tenure of 8 years, providing investors with a long-term investment option.
How often is the interest paid?
The interest on Sovereign Gold Bonds is paid semi-annually, providing investors with regular income.
Can I sell my Sovereign Gold Bonds before maturity?
If desired, sovereign Gold Bonds are tradable on stock exchanges, allowing investors to sell them before the maturity date. However, liquidity may vary based on market conditions.
Are Sovereign Gold Bonds subject to capital gains tax?
Sovereign Gold Bonds are exempt from capital gains tax if held until maturity. However, if sold before maturity, capital gains tax may apply.
Golden Nugget
Adding gold into your investment portfolio, particularly through the ongoing Sovereign Gold Bond issue, can provide diversification, stability, and potential returns.
Gold's unique properties make it a reliable asset during economic uncertainties and market turbulence.
The Sovereign Gold Bond Scheme offers convenience, interest income, and the government's backing, making it an attractive investment option.
However, it is important to consider your risk tolerance, investment goals, and time horizon before allocating a portion of your portfolio to Sovereign Gold Bonds.