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.
Wondering how to buy sovereign gold bonds? Here’s a straightforward guide to help you navigate the seemingly complex landscape of SGBs.
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?
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.
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
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.
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