Understanding Basics of Sovereign Gold Bond (SGB)

The Sovereign Gold Bond or SGB scheme is convenient and safe. Trader has nothing to worry about risks, cost of storage and theft.

It can be bought at bank branches or online and held in demat form-eliminating risk of loss of paper scrip etc. It is advantageous to investors compared to physical forms of metals especially gold or Gold ETFs (Exchange Traded Funds).

Let us check in detail about SGB (Sovereign Gold Bond).

What is Sovereign Gold Bond (SGB)?

Sovereign Gold Bond or better known as SGBs are government securities denominated in grams of gold. They are digital forms of holding gold assets as investments. An investor can apply online through a website of the listed scheduled commercial banks or through a registered broker.

Investors have to pay the issue price in cash and the bonds will be redeemed in cash on maturity. The Bond is fully secured and issued by RBI (Reserve Bank of India) on behalf of Government of India. It can also be bought directly through bank branches.

Benefits of Buying Sovereign Gold Bonds

No storage issue: The quantity of gold stay protected, since the trader receives the ongoing market price at the time of redemption/ premature redemption.

Safe: The SGB is digital and secured alternative to holding gold in physical form. Investors fill up a form for assurance of the market value of gold at the time of maturity and periodical interest.

No cheating:  SGB is free from cheating issues regularly faced by conventional gold investors. Purity of gold is always an issue if bought directly from the unorganised market. SGB negates that tricky situation. The bonds are held digitally in the books of the Reserve Bank of India or in demat form.

If you want be a successful SGB trader, you’ll need to be an intelligent trader. There are very few requirements to start trading in SGB bonds. It can be broken down into three main things.

How to Smartly Invest in Sovereign Gold Bonds

1. Money:

The money we are talking about is not just the money that is lying in your bank account. It is not the money that you use to pay for your rent, your car or your food. A smart SGB investor always invests money in SGB rather than in savings account of banks. Good part is, the Bonds do not require huge investments, they are issued in denominations of one gram of gold and in multiples thereof.

Minimum investment in the Bond can be two grams with a maximum buying limit of 500 grams per person per fiscal year.

Conventional stocks can be extremely unpredictable and although you might make a great deal of money it is also true that may lose everything, but not so with SGB it has assurance from RBI, your investment is secured. After you have built up a nice profit, you can re-invest your profits from past bonds which will snowball your earnings. You can buy SGB in the name of trusted family members.

2. Knowledge:

This is without a doubt the single most important factor in determining whether your budding career as a trader will be a spectacular triumph or a dismal failure in terms of making profits. But in case of SGB you need not require similar stock trading tricks or experience. It depends on the associated banks and their offering. Do thorough research before selecting the SGB bank. If you are a newcomer to investing, you do not worry, you just need to know how to operate your net banking account and voila! you are ready to invest in Sovereign Gold Bond. It is however highly recommended to read several bank SGB offers before spending any money with them.

3. Make A Plan:

Before you investing any money in SGBs or stocks, make an investment plan and stick to it at all times. This will help you become disciplined and will also help you organise your time and investments. Do not over commit SGB investments as the ROI is abysmally low though it is highly secured. SGBs offer 2.5% PA return. Your gold in digital format stays protected if it was in physical form you would have to depend on organic growth of gold price. That is why SGB should be part of investment portfolio of your online stock trading accounts. Keeping things simple will result in less stress. Your plan should consist of the investments you are going to make and why and how much you are investing in some of the SGBs.

Now you have got all the major elements in place you are set for buying Sovereign Gold Bonds. But remember that gold market knowledge is the most powerful tool you have to make your SGB investments successful so start learning SGB basics from today. Here, you can download online share trading app

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