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Another tranche of Sovereign Gold Bonds (SGBs) for 2022 – 2023 is here, the subscription window to which will open for 5 days, from 6 March – 10 March 2023. The issue price has been set at INR 5,611 per gram of and an INR 50 discount would be given to all online applicants.
Before applying for these bonds, investors might be having some doubts or want to know more about this investment vehicle. In that vein, here are 5 of the most common FAQs to give you some more clarity.
What exactly are these bonds?
These are asset-backed government securities but issued by the Reserve Bank of India (RBI). The underlying asset of these instruments is gold (1 gram per bond), making it an alternate way to buy gold for investors.
What are the interest and tenure of these bonds?
As this is not just gold but a gold-backed bond, investors tend to enjoy an interest of 2.5% per annum. This might seem quite less, but it is over and above the price gain of gold backing the bond. In a nutshell, investors get the benefit of both the interest on the bond and the price appreciation of gold.
The standard tenure is 8 years, however, investors also get an option to exit after 5 years. Also, these bonds can be sold on the stock exchange but as the liquidity in the bond market is quite poor, it’s better to invest with a minimum time horizon of 5 years.
What is the risk in these bonds?
SGBs are considered to be some of the safest investment vehicles out there. However, as there is no free lunch in the investment world, one risk is still there which is a decline in the price of gold. Obviously, if you gain on price appreciation, you would also lose if the gold price falls. The other component i.e. the interest payment is almost risk-free or has negligible risk.
What is the minimum amount one can invest?
For an individual, one has to buy a minimum of one gram (one bond), whatever the price may be. For the current tranche, it is set at INR 5,561 (after the online discount). The maximum limit is 4Kgs per financial year per individual.
From where to purchase these bonds?
This is the most-asked question as investors in India are not having good exposure to the bond market so they are unaware of the investing infrastructure. Thanks to fintechs, it’s now been easier than ever. Platforms such as Coin (by Zerodha), GoldenPi, Wint Wealth etc. can be explored.
Read More: Opinion: Extended Timings for Equity Markets Till ‘5 PM’!
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