In Tiny Doses
Gold has time and again proven itself to be a safe haven. It makes sense to make it a part of the portfolio in spite of not-so-great returns.
- Dec 25, 2018,
- Updated Jan 4, 2019 1:06 PM IST
Indians love gold. The country is the worlds second-biggest buyer of the yellow metal and consumes 800-900 tonnes of it annually, as per the World Gold Council. In fact, one in every two households in India bought gold at least once over the last five years, as per the ICE 360 Survey 2017. Money Today examines whether it makes sense to add it to your portfolio in 2019.
While gold ETFs and Gold Savings Schemes are available throughout the year for purchase and redemption, Sovereign Gold Bonds are issued during specific periods by the government. Tranches have been issued in April 2018 and every month from October 2018. The pattern is likely to be repeated. January 2019 (14th-18th) and February 2019 (4th-8th) issuances have been announced.
Also, SGBs come with a five-year lock-in, so your investment in gold, if made for a specific purpose, should match the eight-year horizon or the five-year lock-in. If not held till maturity, one may have to sell on the exchange. Currently, the SGBMAR25 Bond is quoting at Rs2,802, a 14 per cent discount to the face value of Rs2,943.
Sunil Subramaniam, MD and CEO at Sundaram Mutual Fund, says, "While sovereign gold bonds offer a fixed rate of interest, there is a lock-in. Often festive buying is linked to sentiment. Gold ETFs and gold savings funds are available for purchase and redemption on exchanges without any lock-in. ETFs offer better post-tax returns and are convenient compared to gold in other forms."
However, if you transfer your gold bonds before maturity, you can get indexation benefit. Dhirendra Kumar, CEO of Value Research, says, "SGBs deliver higher returns than gold."
Weigh your options well just as you would check the metal's weight while buying.
(The author is a freelance writer based in Mumbai)
Indians love gold. The country is the worlds second-biggest buyer of the yellow metal and consumes 800-900 tonnes of it annually, as per the World Gold Council. In fact, one in every two households in India bought gold at least once over the last five years, as per the ICE 360 Survey 2017. Money Today examines whether it makes sense to add it to your portfolio in 2019.
While gold ETFs and Gold Savings Schemes are available throughout the year for purchase and redemption, Sovereign Gold Bonds are issued during specific periods by the government. Tranches have been issued in April 2018 and every month from October 2018. The pattern is likely to be repeated. January 2019 (14th-18th) and February 2019 (4th-8th) issuances have been announced.
Also, SGBs come with a five-year lock-in, so your investment in gold, if made for a specific purpose, should match the eight-year horizon or the five-year lock-in. If not held till maturity, one may have to sell on the exchange. Currently, the SGBMAR25 Bond is quoting at Rs2,802, a 14 per cent discount to the face value of Rs2,943.
Sunil Subramaniam, MD and CEO at Sundaram Mutual Fund, says, "While sovereign gold bonds offer a fixed rate of interest, there is a lock-in. Often festive buying is linked to sentiment. Gold ETFs and gold savings funds are available for purchase and redemption on exchanges without any lock-in. ETFs offer better post-tax returns and are convenient compared to gold in other forms."
However, if you transfer your gold bonds before maturity, you can get indexation benefit. Dhirendra Kumar, CEO of Value Research, says, "SGBs deliver higher returns than gold."
Weigh your options well just as you would check the metal's weight while buying.
(The author is a freelance writer based in Mumbai)