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Alternative Investments To Sovereign Gold Bonds
If you want to invest in gold but don’t want to hold physical gold, then sovereign gold bonds are the perfect substitute. Sovereign gold bonds are government securities that denominate grams of gold and represent the value of gold.
They’re issued by the Reserve Bank of India (RBI), on behalf of the Indian government, and are generally considered to be one of the safest low risk investments one can make.
Sovereign gold bonds are great for investors who have a low risk tolerance, but they do come with negatives of their own: Your investment in SGB can result in a loss as the value of the sovereign gold bond is directly linked to the price of gold in international markets.
If you buy the bond at a higher price than what you redeem it at, you may end up incurring a loss.
In this article, we’ll go through some key features of sovereign gold bond investments, and alternative investments to sovereign gold bonds for those who are looking for low risk investments for long term growth.
Key Features Of Sovereign Gold Bonds
- Tenure and Exit Option: SGBs have a tenure of eight years, with an option to exit from the fifth year onwards. This provides flexibility for investors who may need access to their funds before the bond matures.
- Investment Limits: The minimum investment required is just one gram of gold, which makes it accessible for smaller investors. The maximum investment allowed is four kilograms for individuals and Hindu Undivided Families (HUFs), and twenty kilograms for trusts and similar entities.
- Interest Rate: SGBs offer a fixed interest rate of 2.5% per annum, payable semi-annually. This interest is over and above the capital appreciation linked to the price of gold.
- Redemption Price: Upon maturity, the redemption price is based on the average closing price of gold of 999 purity for the last three business days, ensuring that investors receive a fair market value for their investment.
- Tax Benefits: If you invest in holding SGB till maturity, you can get an exemption from capital gains tax. This makes SGBs a tax-efficient investment option.
- Convenience: These bonds can be conveniently held in demat form or with the Reserve Bank of India (RBI), eliminating storage issues associated with physical gold.
5 Alternative Investments To Sovereign Gold Bonds
Fractional Ownership of Commercial Real Estate
Not everyone has the means to invest in real estate by outrightly purchasing high end commercial or residential properties. Investing in real estate through fractional ownership makes real estate that much more accessible to investors.
Fractional ownership allows investors to own a portion of commercial real estate properties, such as office buildings, retail spaces, and warehouses, without needing crores of rupees.
Multiple investors come together to pool in their money and jointly take an ownership stake in a commercial property.
Fractional ownership offers several benefits, including the potential for regular rental income and diversification across multiple properties, which can mitigate risk.
Invest in EVs (Electric Vehicles)
Investing in electric vehicles is currently one of the country’s fastest growing alternative investments. The automobile industry is undergoing significant transformation, and investing in EV stocks and infrastructure provides an excellent opportunity for investors seeking to capitalise on the trend towards sustainable and green technologies.
The EV market has enormous growth potential, with rapid expansion driven by increased adoption and technological advancements.
Assetmonk has introduced a fixed-income product in the EV public charging sector, requiring a minimum investment of INR 5 lakhs and offering a 12% fixed yield.
Gold ETFs (Exchange Traded Funds)
Gold ETFs Gold exchange-traded funds are another alternative to sovereign gold bonds, acting as a substitute for holding gold.
These funds are easy and convenient ways of investing in gold without the hassle of physical storage, as they track the price of gold. ETFs are highly liquid and easy to access because they trade on stock exchanges.
The investor can easily and very quickly transact in the ETFs; and circumvent any storage or transportation costs that come with owning gold.
One disadvantage of investing in Gold ETFs is the high management fee charged by the funds, which is relatively lesser if compared with gold mutual funds.
Market Risk: The value of gold ETFs also fluctuates with the market price of gold, indicating some level of market risk to investors.
Invest in Gold Mutual Funds
Investing in gold mutual funds is another option, as they invest in gold-related securities such as gold mining companies and physical gold. Gold mutual funds offer professional management and diversification, making them appealing to those looking to profit from the gold market without actually purchasing physical gold. The advantages include experienced fund managers who strive for maximum returns and lower risk through diversification. However, gold mutual funds may have higher management fees than ETFs, and their performance can be influenced by general market conditions and management decisions.
Invest With Assetmonk
Like the name suggests, alternative investments represent a departure from the conventional. Alternative investments may not be for everyone, but are they the right choice for you? This is where we come in.
Assetmonk is a unique player in the real estate alternative investment space By marrying the stability of conventional real estate investments with alternative financial investments, we have constructed an innovative bridge between traditional property investment and contemporary wealth management strategies.
Assetmonk provides a web-based dynamic alternative investment platform, it empowers investors to own stakes in high-value commercial properties, opening up opportunities for them in real estate investments with significantly lower entry barriers.
In doing so; we present investors with a unique avenue for growth by putting them in pole position for reaping off of their financial investments.
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