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Wednesday, October 27, 2021

Dhanteras 2020: SGB vs ETF; Change the way of investing in this Dhanteras gold, you will get more returns

It is a tradition to buy gold on the auspicious occasion of Dhanteras.

Dhanteras 2020: Gold has become a safe investment option due to the Corona epidemic. It is a tradition to buy gold on the auspicious occasion of Dhanteras. Since last Diwali, its price has increased by 32 percent so far. Most Indians prefer to buy jewelery, gold coins or gold bars in the name of investing in gold. However, there are options for investors such as Sovereign Gold Bonds, Golott ETFs (Exchange Traded Funds) and e-Gold. Let us see which form of gold is better to invest in.

Last chance to invest in SGBs today

On Dhanteras and Diwali, the government has launched the eighth trench of the Sovereign Gold Bond (SGB). Its subscription is open till today i.e. 13 November. Its issue price is kept at Rs 5177 per gram. However, a discount of Rs 50 per unit will also be available on online subscription. The duration of SGB is 8 years, however after five years, investors will get the option of exit. Half of the interest on this is 2.5 percent.

No tax liability on SGB at maturity

There is no charge for buying SGB from the primary market, but one-time brokerage has to be paid for buying it from the secondary market. Analysts believe that SGB can prove to be a better investment option if it is held till maturity because it does not have to pay capital gains tax. If it is exited before maturity, then short term and long term capital gains tax will have to be paid.

Better chance of investing in Gold ETF

Gold ETFs are open-ended funds and the returns on this are determined by the actual returns on investment in physical gold. Investors’ interest in gold ETFs remained for the seventh consecutive month as shown by the investment in October last month. 384 crores were invested in Gold ETFs in October and so far this year 6341.2 crores have been invested in Gold ETFs. After reaching a record high this year, its prices have fallen, so in a way it is an excellent investment opportunity for investors.

Add Gold ETF to portfolio

Gold ETF is a cheaper option for investors because it does not have to pay making charges and it does not have to worry about the purity of gold. Analysts believe that all investors must invest in gold or gold ETFs in their portfolio.

Gold ETF: How much investment can you start?

According to ICICI Prudential AMC (ETF Business) head Nitin Kabdi, gold ETFs are a better investment option than physical gold. There is no need to worry about its storage and theft as it will be in Demat form. There is no making charge on this, due to this investment in it becomes more cheaper than physical gold. Nitin Kabdi says that if the investors who want to invest in future to keep some units (grams) of gold, then they can start SIP in Gold Fund with minimum Rs. 1000. This will enable them to raise the gold unit after a time gap has passed.

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SGB vs Gold ETF vs Physical Gold

  • Interest is earned on SGB and returns are also higher than Gold ETF or Physical Gold.
  • In gold ETFs, fund management charges have to be paid up to 0.5-1 per cent, while in physical gold, making charges have to be paid.
  • If you talk about liquidity then gold ETF is a better option because SGB has an eight-year maturity period and only after five years it gets exit option.

FD rate at decade low

Fixed deposit rates have reached a decade low and equity funds’ returns were very weak despite the Sensex reaching record highs. Because of this, gold was the best performing asset this year. Analysts believe that gold prices may remain positive on the upside. According to Chirag Mehta, senior fund manager at Quantum AMC, investing in gold can be a good financial decision as it is playing a risk-reducing and return-enhancing role.

Nisha Chawlahttps://www.businesskhabar.com/
She is an expert in Banking, Finance and working with an international bank. She sharing her ideas and knowledge with Business Khabar.
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