In India, there is a popular investment option called Sovereign Gold Bond (SGB). It is a government backed bond denominated in grams of gold. This means that the price of the bond is linked to the price of gold. Investors buying SGBs essentially buy gold in paper form.
Some of the benefits of investing in Sovereign Gold Bonds are:
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Safe: SGBs are issued by the Reserve Bank of India (RBI) on behalf of the Government of India. This makes them a safe and secure investment option.
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Eliminates storage hazards: Unlike physical gold, SGBs do not come with the risk of theft or loss. They are held in demat form, similar to the way shares are held electronically.
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Regular interest: SGBs offer a fixed interest rate of 2.50% per annum, payable semi-annually. It provides investors with regular income on their investment.
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Definition of Capital: The value of SGBs is linked to the price of gold. So, if the price of gold goes up, so will the value of your SGBs.
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Tax Benefits: If you hold SGBs till maturity, you are exempt from capital gains tax.
However, there are a few things to keep in mind before investing in SGBs:
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interest rate: The interest rate on SGBs is fixed at 2.50% per annum. It may not be as much as you can get from other investments.
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Liquidity: SGBs can be traded on the stock exchange after the lock-in period ends. However, the liquidity of SGBs is not very high, which means that it may be difficult to sell your SGBs when you want to.
Overall, Sovereign Gold Bonds are a good investment option for those looking for a safe and secure way to invest in gold. However, it is important to consider the risks and benefits before investing.
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