Things to keep in mind while investing in Sovereign Gold Bonds
As a principle of financial planning, investment in gold should be in the range of 5-10 per cent of one's financial portfolio.
Are you considering investing in the 7th Tranche of Sovereign Gold Bonds (SGBs) that are open for subscription till March 3? While investment experts have given a thumbs up to the bonds offering by the government as a good portfolio diversification tool, they also advise against going overboard on a single instrument.
“As a principle of financial planning, investment in gold should be in the range of minimum 5-10% of one's portfolio. For example, if total financial portfolio is worth Rs 1 crore then investment in gold (including SGBs) should be at least Rs 5 lakhs but not more than Rs 10 lakhs. We advise investors to invest in Sovereign Gold Bonds keeping this guideline in mind,” Anil Chopra, Group CEO & Director, Bajaj Capital told Moneycontrol.
Chopra has the following advice for prospective investors:
• If you prefer any-time liquidity then you should opt for demat option for the gold bonds, instead of physical option.
• You must either invest on a joint basis with your spouse or any other close family member or you should specify your nominee to avoid any complications in unfortunate event of death.
• Be prepared to hold the bonds for a long duration. Remember that investment in SGB is for a period of 8 years with minimum lock in of 5 years.
• Do not push your investment to the last moment, because you might end up missing the March 3 deadline.
• Be prepared for short-term volatility. In the short term, gold prices may fluctuate in a range-bound manner. However, over entire period of maturity of 8 years, gold is expected to give decent returns.
Aasif Hirani, Director, Tradebulls, reminds investors to keep capital gains tax incidence on the bonds. “If an individual redeems bonds before completion of 3 years, short term capital gain tax will have to be paid,” Hirani says. Interest on the bonds is also taxable.
He also points to lack of liquidity. “If individual wants to exit bonds before maturity date, the only option is to redeem them through NSE or BSE and there is lack of liquidity in SGB trading right now.”
While subscription will be open till March 3, the bonds will be issued on March 17. The SGB issue price has been set at Rs 2,893 per gram of gold and is being offered at Rs 50 per gram less than the nominal value.
As a principle of financial planning, investment in gold should be in the range of 5-10 per cent of one's financial portfolio.
Are you considering investing in the 7th Tranche of Sovereign Gold Bonds (SGBs) that are open for subscription till March 3? While investment experts have given a thumbs up to the bonds offering by the government as a good portfolio diversification tool, they also advise against going overboard on a single instrument.
“As a principle of financial planning, investment in gold should be in the range of minimum 5-10% of one's portfolio. For example, if total financial portfolio is worth Rs 1 crore then investment in gold (including SGBs) should be at least Rs 5 lakhs but not more than Rs 10 lakhs. We advise investors to invest in Sovereign Gold Bonds keeping this guideline in mind,” Anil Chopra, Group CEO & Director, Bajaj Capital told Moneycontrol.
Chopra has the following advice for prospective investors:
• If you prefer any-time liquidity then you should opt for demat option for the gold bonds, instead of physical option.
• You must either invest on a joint basis with your spouse or any other close family member or you should specify your nominee to avoid any complications in unfortunate event of death.
• Be prepared to hold the bonds for a long duration. Remember that investment in SGB is for a period of 8 years with minimum lock in of 5 years.
• Do not push your investment to the last moment, because you might end up missing the March 3 deadline.
• Be prepared for short-term volatility. In the short term, gold prices may fluctuate in a range-bound manner. However, over entire period of maturity of 8 years, gold is expected to give decent returns.
Aasif Hirani, Director, Tradebulls, reminds investors to keep capital gains tax incidence on the bonds. “If an individual redeems bonds before completion of 3 years, short term capital gain tax will have to be paid,” Hirani says. Interest on the bonds is also taxable.
He also points to lack of liquidity. “If individual wants to exit bonds before maturity date, the only option is to redeem them through NSE or BSE and there is lack of liquidity in SGB trading right now.”
While subscription will be open till March 3, the bonds will be issued on March 17. The SGB issue price has been set at Rs 2,893 per gram of gold and is being offered at Rs 50 per gram less than the nominal value.
Happy Investing
Source: Moneycontrol.com
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