My financial advisor has been after me suggesting me to invest in Sovereign Gold Bonds and I am confused. All my life I have only believed in investing in physical gold. I have never been in favor of Gold mutual funds and ETFs which schemes are already existing. Somehow with Gold I have some different concepts in my mind. I feel that having it in physical form will allow it to remain in my custody and it is safe. Whereas these other forms you never know, suddenly some policy changes and all and the value can go off or even the gold completely can go off. I know that's an exaggeration.
We Indians have sentimental value with Gold, we buy them on all good occasions, and it is said that maximum amount of Gold will be found in Indian homes. We accumulate Gold from one generation to another. It gets passed on. I have seen this in my home also. From a very early age my dad had started buying Gold for me and my sister at every occasion and the same is being followed by me for my Son. We barely sell gold. First of all, I have never seen Gold as an Investment option. For me once bought, it's going to be there forever, unless some major financial crises would hit me in future and I would have no option but to sell it. Otherwise, no chance that I will sell. Not sure about the next generation, they may not look at it the same way.
My Son does not have the same sentimental value with Gold as I do, he always tells me it's one form of investment and should be used when needed. I am sure when it gets passed on to him, then he may treat it very differently than the way I do.
This guy has been trying to pastor me to invest in these Sovereign Gold Bonds. I asked him to share the details with me. On the first look of it everything looks good but then the one thing that does not go well with me is that it has a maturity period of 8 years. It's a long time so I will any day again prefer physical gold, because if I need it anytime, I can use it and I do not have to wait for 8 years.
It surely has some benefits like there is no tax on capital gains at maturity and there is 2.5% half yearly interest, which other forms of gold will not give and there is no GST also. The other one advantage it has over physical gold is the storage part. There is no storage cost with the bonds, whereas the physical Gold will have some storage cost like a bank locker fee. To promote the buying of these digital bonds the government has also been offering a discount of 50 Rs per gram which would make some difference if big quantity is invested.
I have been evaluating the pros and cons of it and it's not a bad scheme if you are starting to invest in it early in life, but for me at this stage of life it does not look very suitable.
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