Best Way To Invest In Gold In India in 2023: Gold has always been a popular choice for investment, but it can be tricky to figure out the best way to go about it. If you’ve ever checked out Sovereign Gold Bonds (SGBs) on the Zerotha platform, you’ve probably seen a bunch of options, each with different values.
Making the wrong choice can lead to financial losses while making the right one can earn you up to 10% or more in returns. In this article, we’ll break it down for you and help you choose the best Sovereign Gold Bond from the secondary market to maximize your gains.
Best Way To Invest In Gold In India: Sovereign Gold Bonds
Let’s start by breaking down what was said in the transcript. SGB stands for Sovereign Gold Bond, and it’s a gold investment backed by the government. These bonds have a specific maturity date, and the government promises to repay you the bond’s original value at that time, adjusted to match the current gold price.
On platforms like Zerotha, you’ll find a variety of SGBs, each with a unique code indicating when it matures. For example, “SGB July 27” means the bond matures in July 2027. What’s important to understand is that these bonds are actively traded, and their prices can differ quite a bit.
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How to Choose the Right SGB
To make a smart choice, follow these steps:
Visit the NSC’s Website: First, go to the NSC’s website and head to the Sovereign Gold Bond section. You’ll find a list of all the SGBs available for purchase in the secondary market.
Decipher the Codes: Understand the codes associated with each bond. The code usually includes “SGB” followed by the month and year it matures.
Analyze the Prices: Sort the bonds based on the last traded price (LTP) from the lowest to the highest. This step is crucial to identify which bonds are currently available at the best rates.
Consider Your Investment Duration: Decide how long you plan to invest in the SGB. Bonds with closer maturity dates are often traded at higher prices due to the reduced risk of capital gains tax.
Remember the Issue Price: Always keep in mind that the interest you earn on an SGB is based on the bond’s original value (issue price), not its current market value. Take note of this issue price for each bond you’re interested in.
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SGB Investment Strategy for 5 Years
Let’s illustrate this strategy with an example. Suppose you have 10 lakh Rupees to invest in SGBs, and you plan to invest for five years. By following the steps above, you find a bond with an issue price of 3,443 trading at 5,856. Your investment in this bond earns you 171 units.
If you assume an annual interest rate of 2.5%, you’ll earn 73,000 Rupees over five years. Additionally, you benefit from the price difference, which results in a profit of 58,000 Rupees. In total, your investment returns 21,93,000 Rupees, providing an annual return of 17.01%.
Comparing Investment Options
Now, let’s compare the returns from this strategy to other investment methods:
Normal Method: In the normal method, where investors might not be aware of price differences, the issue price is higher. In this example, your returns would be 2,00,000 Rupees lower than the chosen strategy.
Physical Gold: If you opt for physical gold, you won’t earn any interest. Plus, you might incur making charges, resulting in significantly lower returns, as much as 5,42,000 Rupees less in this scenario.
In conclusion, when chosen strategically, Sovereign Gold Bonds can provide impressive returns. The only reason to consider physical gold would be for gifting purposes, such as jewelry. Otherwise, SGBs, by leveraging price differences and accruing interest, offer a more lucrative investment avenue.
It’s essential to remember that these calculations are based on certain assumptions, and gold market conditions can change. To make the most of your investment, stay informed and adapt your strategy as needed.
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