Trading in Sovereign Gold Bonds can be quite rewarding!
India is experiencing a sudden frenzy of investing in Sovereign Gold Bonds. But, what is so phenomenal about these bonds that offer it a pedestal higher than the actual physical possession of gold?
Well, to start with, gold bought from banks or jewelers is obtained at a premium of around 10%, whereas a gold bond comes at a price of actual gold. Further, prudent investors capitalize on the exemption that sovereign gold is subjected to unlike physical gold- in case of which returns are completely taxable.
Capitalizing on the Sentiment
Every Indian parent segregates their savings in gold with the sole expectation of being able to endow their kids with prosperity during marriage. Therefore, considering the ever rising demand for gold jewelry in India, the capital market insures investors with their ideal offer.
Sovereign gold bonds encourage a saving discipline that helps your capital appreciate with time unlike high investments on getting jewelries made. Owing to the fact that trends are subject to fast transition, thus, it would hardly take time for your jewelry to go out of fashion leading you to a loss ranging from 6 to 14 % on making charges.
It also saves you the additional cost and hassle of securing them in a vault for which the banker charges a whooping amount.
Nitty-Gritty of Purchase
Investment on Sovereign gold bonds is can be pretty flexible. One can choose to invest from a minimum of 1 gm to a maximum of 500gms.
The bonds are restricted from being offered in the open market all year round. It is issued on intervals by the government. Primary issue of different tranches is put forth for open purchase. The deal is offered every 2-3 months, and the offer is open for a week. In case investors are bent upon purchasing gold bonds as and when they wish to, they are likely to be directed to earlier issues available at market value that are listed in the secondary market.
The fun of owning Sovereign Gold Bond is linked to the capital multiplying mechanism. Owning gold in physical form fetches you profit on selling without any added benefit, whereas gold bonds assures cent percent purity and helps you reap rewards in the form of additional accumulated interest besides the actual cost. Besides, your investment can act as a collateral, easing up the process of borrowing loans.
The interest fixed by the government per annum happens to be 2.50% at present without the compound factor. Interest is paid at half yearly intervals on a regular basis besides the last, which is paid at maturity along with the principal.
A Disclaimer before you take the final leap
Returns on Sovereign Gold Bonds are absolutely market linked and completely rests on the prevailing market rate at maturity after eight years.
In spite of the windfall returns and benefits Sovereign Gold Bonds promise, before taking a plunge with high hopes one has to ensure that the goal you wind to scale with the investment ought to be at least 5 years away from the initiation of term. Although the tenure of maturity is 8 years, 5 years is the minimum lock in period.