Is It Mandatory to Purchase Sovereign Gold Bonds Online?
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No, you can purchase SGBs both online and offline through Bajaj Broking, banks, SHCIL, and post offices.
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Bonds are one of the most popular financial instruments available in the Indian markets, next only to equity. Traditionally, large institutional investors were the primary players in the bond market. However, of late, many retail investors have also shown interest in investing in bonds. One of the many advantages of bonds is that there are multiple types catering to different investor risk profiles. As a matter of fact, you can even find bonds that are ideal for conservative investors with low-risk tolerance; the sovereign gold bonds (SGB) being one of the many examples.
Sovereign Gold Bonds (SGBs) are an increasingly popular investment option in the Indian financial market, providing a safe alternative to holding physical gold. Traditionally dominated by large institutional investors, the bond market has recently seen growing interest from retail investors as well. For those looking to invest in gold without worrying about storage or safety, SGBs offer a convenient solution with additional benefits
Sovereign Gold Bonds (SGBs) were launched by the Reserve Bank of India (RBI) in November 2015 under the Gold Monetisation Scheme. These bonds are issued by the Government of India, allowing investors to benefit from the price appreciation of gold, while also earning an annual interest rate of 2.5% on the invested amount.
When you invest in SGBs, you’re essentially buying a bond that tracks the value of gold. The bond price is tied to the market value of gold, which means that any changes in gold prices will directly affect your returns. Since SGBs are backed by the Government of India, they carry no default risk, offering a secure investment option. Upon maturity, you receive the current market value of gold in Indian Rupees.
Before we look at how to invest in sovereign gold bonds, it is important to first understand what they are.
Sovereign Gold Bonds were launched in November 2015 by the Reserve Bank of India (RBI) under the Gold Monetisation Scheme. Designed to leverage the gold affinity of Indians, these bonds enable investors to partake in the capital appreciation of gold.
In addition to any potential capital appreciation due to the increase in gold prices, investors are also paid interest of about 2.5% per annum on their invested capital. Since the scheme is backed by the RBI, it carries no default risk.
Also Read: Capital Gain Bonds (54EC) Explained
Now, let’s quickly go through the highlights of SGBs before checking out how to invest in gold sovereign bonds.
Also Read: How to Invest in Government Bonds in India?
Buying Sovereign Gold Bonds (SGBs) online is simple and can be done from the comfort of your home. Here’s a step-by-step guide on how to invest in SGBs through internet banking:
Step-by-Step Guide to Buying SGBs Online:
Fill out the application form and submit it
Persons resident in India as defined under Foreign Exchange Management Act, 1999 are eligible to invest in Sovereign Gold Bonds. Eligible investors include:
No, it is not mandatory to purchase Sovereign Gold Bonds online. Investors can buy SGBs both online and offline. While the online process is easier, you can still buy SGBs by visiting a branch of a Bajaj Broking or Scheduled Commercial Bank, Stock Holding Corporation of India (SHCIL), or a designated post office. The offline application process involves submitting KYC documents and a Demand Draft or Cheque for the investment amount.
However, a notable advantage of applying online is the discount of Rs. 50 per gram on the nominal value of the bond.
Pros Cons No risk of handling or storing physical gold Returns depend on gold prices Interest income of 2.5% per annum Locked-in for 8 years (with early exit options) Backed by the Government of India, eliminating default risk Possible capital loss if gold prices fallHow to Invest in Sovereign Gold Bonds in India?
If you wish to make an investment in SGBs, you can do it offline by physically visiting a bank branch or online from the comfort of your own home. Here’s an overview of the process you need to follow.
How to Invest in Sovereign Gold Bonds Online
The Reserve Bank of India has empowered certain Scheduled Commercial Banks (SCBs) to enable interested investors to apply for the bonds online. If you have an internet banking account in any of the listed SCBs, you can follow the steps outlined below to invest in sovereign gold bonds.
That’s it. The required investment amount will be instantly debited from your bank account. Once the bonds are issued by the Reserve Bank of India, you will receive the same at the address registered with your bank.
How to Invest in Sovereign Gold Bonds Offline
If you’re not technologically adept or don’t have an internet banking account, you can still invest in sovereign gold bonds by following the steps listed below.
Once you submit your application form, you will receive an acknowledgement. You need to keep the acknowledgement safe until the bonds are issued by the RBI. Once issued, they will be sent to the address specified in the KYC documents that you submitted.
While Sovereign Gold Bonds offer a secure and low-risk investment, there are some potential risks to consider:
Interest Rate Risk: While SGBs provide a fixed interest rate of 2.5%, changes in the broader interest rate environment may affect the attractiveness of your investment.
Now that you know how to buy sovereign gold bonds, let’s look at a few things you need to be aware of before investing in them.
Also Read: Benefits of Investing in Bonds
Sovereign Gold Bonds are a smart choice for investors looking to gain exposure to gold without dealing with physical storage or purity concerns. As a government-backed investment, SGBs come with no default risk, making them one of the most secure forms of investment. While they offer interest income and price appreciation, investors should be aware of the potential risks associated with gold price volatility. Overall, investing in Sovereign Gold Bonds can be a great way to diversify your portfolio.
SGBs are easily one of the best investment options currently available. It carries no default risk since it is guaranteed by the Government of India. However, the returns are market-linked and you may even lose your capital if the gold value declines after you invest. That said, making an investment in sovereign gold bonds is a good way to diversify your portfolio risk.
Disclaimer: Investments in the securities market are subject to market risk, read all related documents carefully before investing.
This content is for educational purposes only. Securities quoted are exemplary and not recommendatory.
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No, you can purchase SGBs both online and offline through Bajaj Broking, banks, SHCIL, and post offices.
Beginners can invest in SGBs online via internet banking or offline by visiting a bank or post office.
Log in to your Bajaj Broking account, navigate to the 'SGBs' section, select the number of bonds, submit the application form, and receive the bonds directly in your Demat account once issued by the RBI.
Some stockbrokers and trading platforms offer SGBs as part of their investment products. You can apply for bonds through these platforms.
You’ll need your PAN card, Aadhaar card, and bank details to complete the application.
You get a ₹50 discount per gram, no physical gold storage hassles, and the convenience of applying from home.
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