What if I don’t have a Zerodha account?
If you have a Demat account with another broker (like Groww, ICICI bank, Upstox etc.), you can simply copy the SGB's scrip name and search for it on your preferred broker’s website or app.
What is a Sovereign Gold Bond (SGB)?
A Sovereign Gold Bond is a government-issued bond denominated in units of gold. It is a debt instrument issued by the Reserve Bank of India (RBI) on behalf of the Government of India and is backed by the government's credit.
SGBs offer investors a convenient and cost-effective way to invest in gold without the need to physically own the metal. They are issued in denominations of one gram of gold or multiples thereof and can be bought and sold on stock exchanges. The price of the bonds is linked to the market price of gold, providing investors with exposure to the gold market without the need to buy and store physical gold.
SGBs offer a fixed rate of interest, which is paid out periodically, providing investors with a regular income stream.
Overall, SGBs can be a good option for investors looking to invest in gold without the need for storage and can provide a stable source of income through periodic interest payments.
Are there any risks in investing in SGBs?
Like any investment, Sovereign gold bonds (SGBs) carry some risks that investors should be aware of. Here are some of the risks associated with investing in SGBs:
- Liquidity risk: SGBs are traded on the stock exchange, but the volume of trading may be low, which can make it difficult to buy or sell the bonds when you need to. Approximately Rs. 5Cr - 7 Cr. amount of SGB is traded daily on exchange.
It's important to carefully consider these risks and any others that may be relevant before investing in SGBs. You should also diversify your investment portfolio to reduce the overall risk and ensure that your investment is well-balanced.
Which is better Gold ETF or a Sovereign gold bond?
The most pertinent question here is Gold ETFs vs. Sovereign gold bonds: which one is better? Both have their own merits and demerits in terms of cost, liquidity, and taxation.
If you want to invest for a long period, you should go with sovereign gold bonds, as they come with superior returns and favourable tax treatment. Moreover, the capital gains earned after the maturity period are exempt from any tax. However, if liquidity is your primary concern, investing in gold exchange-traded funds is better. You can sell it on the exchange and get your money whenever you need it.
Therefore, your decision to invest rests on your preferences and objectives.