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Category: Investment

  • Benefits of Sovereign Gold Bond and everything you need to know about how to invest in it

    Benefits of Sovereign Gold Bond and everything you need to know about how to invest in it

    Sovereign Gold Bonds also known as SGB were launched by Government of India in November 2015, under Gold Monetisation Scheme. Under this scheme, the issues were made open for subscription in tranches by RBI in consultation with GOI. Sovereign Gold Bonds as the name suggests are bonds based on gold market backed by Government of India for fixed interest rates. Basically these bonds are issued by the RBI on behalf of the Government.

    Gold bonds are announced through a press release from the Government usually after every 2 or 3 months with a window of one week when investors can subscribe to these schemes. These Sovereign Gold Bonds have a maturity period of 8 years, but an investor can choose to exit or redeem or choose to encash after 5 years.

    Alternatively, they can sell the bonds in the secondary market if they are listed from the date specified by the RBI. Since Sovereign Gold Bonds are denominated in grams of gold the price of each gram is linked to the value of gold with 999 purity. The gold bonds are restricted for sale to resident individuals, HUFs, Trusts, Universities and Charitable Institutions.

    How to Invest in Sovereign Gold Bonds?

    • You can place an order for sovereign gold bond from Findoc Investmart Pvt ltd account. Also, the SGBs will be sold through Scheduled Commercial banks, Stock Holding Corporation of India Limited (SHCIL), Clearing Corporation of India Limited (CCIL), designated post offices, and recognised stock exchanges — National Stock Exchange of India Limited and Bombay Stock Exchange Limited.
    • Once order is placed you will receive a Certificate of holding on the date of issuance of SGB on email.
    • The tenure for the same being 8 years, on maturity the redemption price shall be based on simple average of closing price of gold of 999 purity of previous 3 business days as published by the India Bullion and Jewellers Association Limited (IBJA)
    • Redemption proceeds and interest are credited to bank account.
    • STCG (Short term capital gain) if held less than 36 months would be as per income slab
    • LTCG (Long term capital gain) if held more than 36 months it would be 20% with indexation benefits.
    • There is an investment limit on buying the SGB’s. The minimum permissible investment limit is one gram of gold. The maximum limit of subscription is 4 Kg for individuals, 4 Kg for HUF, and 20 Kg for trusts and similar entities per fiscal year (April-March).

    Benefits of Investing in Sovereign Gold Bonds

    1. The capital gain earned from SGB investment will be tax exempted if one holds it for 8 years i.e., its maturity.
    2. The investors will be offered a fixed interest rate of 2.50 per cent per annum payable semi-annually on the nominal value along with capital appreciation. This interest payment is divided into two parts and is paid every 6 months to the investor. Irrespective of whether the cost of gold rises or falls, you are guaranteed to receive the interest.
    3. The risk associated to these bonds is minimal since these bonds are backed by government.
    4. SGB is affordable as well since investment amount is minimum as low as 1gram of gold.
    5. Low maintenance cost since no physical locker charges need to be paid, you can save it digitally, eliminates several risks associated with holding physical gold and manually visiting to withdraw the same.
    6. Extremely convenient to carry, SGB certificate is provided on email which is easy to access.
    7. The issue price of the SGBs is less by Rs 50 per gram for the investors who subscribe online and pay through digital mode hence it being more lucrative to buy them over physical gold.
    8. The gold bonds can also be used as collateral for loans. The loan-to-value (LTV) ratio will be as applicable to any ordinary gold loan, mandated by RBI from time to time.

    Drawbacks of Investing in Sovereign Gold Bonds

    • Long-term holding period i.e. Maturity period of 8 years, with exit option after 5 years.
    • These SGB’s are traded on secondary market but they have a low trading volume.
    • The gold bonds are less exposed to people; hence one might find it difficult to stay updated with regards to tranche dates being launched.
    • There may be a slight of risk of capital loss if the market price of gold declines.

    We can conclude stating that these bonds provide one of the safest avenues for SGB investment since these are backed by RBI. From its launch date in November 2015, the scheme has been immense popular, with a total investment of approximately 28 tons of gold worth Rs 13,000 crore, which states its presence getting to people. And the Best of all is it being tax free on maturity. Happy Investing.

  • The Game of Compounding & Timing for Mutual Funds

    The Game of Compounding & Timing for Mutual Funds

    “Forget about timing the market, it doesn’t work. You will lose money. Invest for the long haul and then sit back and wait — the market always goes up in the long run.” – Paul Farrell

    Often we hear investment experts say that it is better to invest time in the market instead of timing the market. While this holds for traders who trade on a daily basis, and their profits are generated from different prices at different times in the market, for an investor, it is better to invest more time in the market, to understand how it is working, and then invest, and in such cases, chances of earning positive returns increases.

    That said when investing in the equity market for a shorter period, entering and exiting the market at the right time can be crucial. However, predicting the future of any stock or even the overall market accurately every time is something beyond the capabilities of a human brain or even AI cannot do so.

    However, does this concept hold for mutual funds as well? Often you will see people asking if is it a good time to invest in mutual funds or not, which is a valid question but the answer needs a little explanation.

    Is There Any Right Time to Invest in Mutual Funds?

    While there is no thumb rule related to the timing of investing in mutual funds, the timing of investing should change according to the type of funds you are investing in or the duration for which you want to stay invested and most importantly the mode of investment – SIP or Lumpsum.

    Since, mutual funds also invest in the same asset classes like equities, debt, alternative investments, and others, thus, while investing a lump sum in a mutual fund, you need to think about the timing a bit. This especially holds for equity mutual funds and if you are investing in them for a shorter duration.

    When the equity market goes up, the NAV of the equity mutual funds or funds having major portions of equity and equity-related instruments also tends to increase. This makes the units of the fund expensive and thus, if you are thinking about lump sum investment during market highs, you may end up with a lesser number of fund units.

    Especially if you are looking for mutual fund investment plans for short term then you should avoid investing in higher NAV funds as markets are volatile and you may never know, when the time of redemption comes, the market may decrease leaving you with losses.

    Thus, if you are investing a lump sum amount in a mutual fund and for the short-term then always try to invest in funds with lower NAV or during the market lows for the asset class in which the fund invests.

    Is There Any Other Way to Invest in Mutual Funds without Worrying About Timing?

    To keep all the hassles of timing the market and your mutual fund investments at bay, you can consider investing in SIPs.

    SIPs are Systematic Investment Plans, which do not depend on market timing. Rather, the more time you stay invested, the potential for higher returns increases.

    Investing in mutual funds via the SIP route has increased drastically in the last few years, especially during the Covid-19 pandemic, since the SIP route helps investors invest in the funds on a regular basis without worrying about whether the markets are at a high or low.

    To help you plan your mutual funds investments better, you can use our SIP plan calculator to estimate potential returns and create a tailored investment strategy.

    How Do Sip Help in Achieving Investment Goals without Timing the Market?

    SIPs lets you invest every month and you can invest small amounts starting from even Rs. 100 or Rs. 500 depending on the fund. If you are wondering how these small investments can help you achieve your investment goals, then you need to know about Rupee cost averaging.

    Rupee Cost averaging helps in mitigating the timing factor involved in mutual fund investments. Here you invest a fixed amount at regular intervals irrespective of market ups and downs and the averaging out of the prices at which the mutual fund units are bought helps in generating better returns for the investors rather than a one-time investment or timing the market.

    Let us understand this with an example.

    Suppose you started an SIP of Rs. 10000 for an equity mutual fund. The NAV of the fund at the start of the investment is Rs. 60 and the most popular equity market index, Nifty is at the 21000 level. Let’s see how it will work –

    Month SIP Amount (Rs.) Nifty Equity Fund NAV (Rs.) Fund Units
    January 10000.00 21000.00 60.00 166.67
    February 10000.00 20200.00 52.00 192.31
    March 10000.00 20400.00 54.00 185.19
    April 10000.00 20200.00 52.00 192.31
    May 10000.00 19800.00 48.00 208.33
    June 10000.00 19600.00 46.00 217.39
    July 10000.00 19400.00 44.00 227.27
    August 10000.00 19800.00 48.00 208.33
    September 10000.00 20200.00 52.00 192.31
    October 10000.00 20400.00 54.00 185.19
    November 10000.00 20600.00 56.00 178.57
    December 10000.00 20800.00 58.00 172.41
    Total Investment 120000.00 Average NAV 52.00 2326.28

    The above table showcases how Rupee cost averaging would work. Now, if you wanted to time the market, and invest the entire amount in the month of January when the market was high compared to the next few months of the year, then at the NAV of Rs. 60, if you had invested the entire Rs. 120000, then you would have bought only 2000 units of the fund. With the help of rupee cost averaging in the SIP route, you get 2326.28 units of the funds for the same amount invested.

    Now you may say, if you had invested when the market dropped in July Nifty touched 19400 and the NAV of the fund became Rs. 44, then you would have got 2727.3 units of the fund. However, can you be certain of when the market will drop and rise? Even Warren Buffet or our very own Rakesh Jhunjhunwala could not.

    This is why investing in mutual funds via SIPs using the rupee cost averaging effect helps retail investors as well as HNIs generate better returns over the long term.

    If you want to invest for the short-term, then you can invest in debt mutual funds, and avoid equity mutual funds as the equity funds are more volatile than debt funds or invest when the market is at a low, but then again you cannot be sure.

    Final Thoughts

    Therefore, instead of looking for the right time to invest in mutual funds, you should start today, and go for long-term investments, as markets rise in the long-term especially when it comes to equity markets. Moreover, you do not have to worry all the time and keep track of the market to invest in your favourite funds. All you need to do is chalk out a plan of investment and invest regularly to achieve the maximum returns without taking higher risks.

  • Everything you need to know before investing in Foreign Exchange

    Everything you need to know before investing in Foreign Exchange

    Do you know which asset is traded the most or the liquid one? If you are thinking about stocks, then wait, stocks or any other stock market instruments cannot match the volume and liquidity quotient of forex trading or to be specific currency trading.

    In this article, we will talk about currency trading in India, how it takes place, the most traded currencies, things you need to know about currency trading, and a lot more.

    What is Forex Trading?

    To begin with, let’s understand what forex actually is. Forex is a word derived from two words, which are Foreign and Exchange. When currencies are exchanged for one another, it is termed as Forex. For instance, the US Dollar is exchanged for Indian Rupees.

    The trading process that is buying and selling different currencies for profit-making can be described as Forex trading or currency trading.

    From investors to multinational companies all take part in currency trading across the world. It is the largest market with average daily transactions of US$4 trillion.

    In India and across the globe, currency trading takes place around the clock. So, there is no restriction on timing for trading.

    However, the most interesting fact about forex trading is that these currencies are traded over the counter (OTC). Thus, the forex market is decentralised and anyone can trade forex irrespective of any centralised exchange unlike the stock market or commodity market.

    Features of the Foreign Exchange Market in India

    Now let’s come to the features of the Foreign Exchange Market in India:

    • Inexpensive: Currencies are traded across the globe and especially in the country for very low costs or expenses. Unlike other investment options, where there are a lot of fees and taxes to be paid, currency trading in India has lower fees. This is due to the fact that the commission, which the intermediaries charge is restricted to the spread that is the price gap between the buying and selling prices of the pair of the currencies, traded.
    • Highly Transparent: Transparency is another crucial factor that comes into play when trading forex. The forex market in India is highly transparent where all the traders get full access to the information and data about all the market deals and orders related to currency trading. Moreover, due to the international aspect of currency trading, transparency is maintained throughout the market. This helps the investors make wiser choices about which currencies to trade and at what prices.
    • Higher Leverage: For trading currencies, brokers in the country most often offer higher exposure limits to the traders. Thus, you can take more positions and increase your chances of making higher profits.
    • Ease of Trading and Convenience: Due to the decentralisation of the forex market, there is no limitation on trading from certain devices or through any particular exchange. This makes it easier for the traders to trade the currency pairs anytime and from anywhere they want if they just have a stable internet connection. You can also set your timings according to the country of the currencies you are dealing in.

    Different Forex Market

    Forex market can be segregated into three sub-markets, which are –

    1. Spot Market: This is a market where trading is done at the ‘SPOT rate’, which means the present rate of the currency pairs. The trader has to be swift in placing orders and making transactions as prices change within the blink of an eye.
    2. Futures Market: Like any other futures market work where orders are placed for trading the asset at a future date or a pre-agreed price, the currency market is no different. Here traders get into standardized agreement and make transactions according to their assumptions of the price movement of the currency pairs.
    3. Forward Market: This is similar to the futures market however, while in the futures market, the agreements are standardized, in the forward market the agreements are custom-made. The rest of the things like the pre-determined price of the currency pairs, and maturity factor remain the same.

    Things You Need to Know Before Starting Currency Trading in India

    By now, you must have got an idea of what is currency trading, so let’s understand the factors you need to keep in mind while trading currencies or forex in India.

    • Commissions: Though commissions are lower for forex trading, you need to understand this as commissions are determined on the basis of the spread. The commission in the forex market is paid to the market makers.
    • Trading Style: Each currency is different and the risk and return quotient of each currency pair varies. So, you need to align your risk appetite and return expectations with the currency pair in order to set a trading approach or style.
    • Brokerage House: Though brokers are not the intermediaries in the forex market, you need to have a trading account and thus, you need a brokerage house, which is highly reputable and offers the best platforms as currency trading requires advanced trading platforms for smoother and swifter transactions.
    • Keep Emotions Away: Forex trading can take a toll on you and your finances if you do not keep your emotions away from the market. As these trades are comparatively inexpensive, often traders take higher risks, which leads them to losses.

    Terms to Know when Trading Forex

    To understand how to trade currency you first need to be aware of these terminologies, which are heavily used in the forex market.

    • Spread: Often called Bid-ask spread, it is the difference between the maximum amount that buyers of a currency pair are willing to pay with the minimum amount that sellers are willing to take. Suppose, the highest bid for USD/INR is Rs. 75 per USD while the minimum ‘ask’ price is Rs. 75.50. Therefore, here the spread is Rs. 0.50.
    • Pip: This is described as the percentage change in a currency pair’s price. The changes in prices in the forex market are quoted in decimals and up to four decimal points.
    • Currency Pair: All currencies are traded in pairs. In simple terms, you trade one currency for another. For instance, in the above USD/ INR example, you are trading INR for USD.
    • Lot: In the forex market in India, currency derivatives are mainly traded. Either currency futures or currency options and thus they are traded in ‘lots’ which consist of a certain number of units of currencies. For instance, a 1000 lot size means, you will be trading 1000 INR units for 1000 USDs.

    How Does Currency Trading Take Place?

    Currencies are traded in different ways. Let’s understand them individually –

    • Direct Trading: This is like trading stocks where you will a currency pair for say X price and if the price moves above X, then you will gain and if it moves below X, you lose.
    • Trading Currency Derivatives: In India, and also across the globe, currencies are mainly traded as derivatives. Currency futures or currency options are traded like equity futures and equity options. If you are trading currency futures, then you are buying future contracts where you agree to pay a certain price for buying or selling the currency pair at a future date.

      With currency option, you do not have the obligation but have the right to buy or sell currency pair at a pre-determined price at the time of expiry of the option contract.

    How Can You Start Foreign Exchange Trading?

    To start currency trading in India you need to –

    • Open a trading account with a brokerage house
    • Complete KYC and get access to your trading account
    • Deposit the amount into your trading account for trading and availing margin or exposure benefits
    • Explore the currency market and choose the pairs of currencies you want to trade
    • Do your research and then start trading.

    Which Are the Top Currencies to Be Traded in India?

    While USD is the currency, that is mainly used for international trade, there are other currencies as well that are popular. Some of the most traded currency in the world includes

    • US Dollars (USD) – It is highly liquid because it is the most popular currency across the world and is accepted as well
    • Euro (EUR) – In second place, is Euro, which is the most traded currency across the globe.
    • Japanese Yen (JPY) – It is the most traded currency in Asia
    • Pound Sterling (GBP) – This is the fourth most popular and traded currency across the world. It has close competition with USD, as, after USD, GBP is one of the most accepted currencies for international trade.
    • Canadian Dollar (CAD) – Due to its relationship with crude oil, CAD has high popularity and a close connection with USD which is obvious. It is regarded as the most important commodity currency in the world.

    While the most traded currencies are the above-mentioned ones, the best currency pairs to trade depend on your trading goals, approach, and research work.

    Pros and Cons of Currency Trading

    Pros Cons
    Highly liquid market Highly volatile
    Accessible round the clock Requires in-depth understanding of currencies, economic fundamentals, and technical analysis
    Lower fees and commission Not regulated unlike other markets
    Decentralised market –
    Margin trading available –

    Why Forex Market Is Booming in India?

    In India, forex trading has boomed in recent years due to multiple factors which include –

    • Increased use of future derivatives for trading currencies in the Indian currency market
    • Retail investors can now invest in currencies, which were early restricted to HNIs, banks and institutional traders
    • Increasing financial literacy rate and people becoming aware of the currency market
    • Globalisation and liberalisation

    Conclusion

    Thus, we can conclude by saying, that with the right knowledge about the currency market, and trading platforms, tools and resources for trading currencies, traders nowadays can easily explore this market. However, before getting into trading currencies, one needs to learn about the fundamentals of how the forex market works.

  • Common Mistakes to avoid when opening a Demat account online

    Common Mistakes to avoid when opening a Demat account online

    In 1996, SEBI eased the hassle of trading and introduced an online demat account, allowing individual retail investors to trade directly with the help of a mediator, but online. The awareness of investing money is growing rapidly. Call It global influence or influencers’ impact, more and more people are drawn towards investing in financial products. In alone FY23, nearly 5 crores (24.8 million) of Demat accounts were opened. That is around a 25% increase from the last FY.

    A Demat account is required to hold and manage securities online. It is generally accompanied by a trading account required to invest in the stock market, bonds, IPOs and other financial products. In today’s digital age, opening a Demat account online has also become a streamlined and convenient process. Investors are required to complete the EKyc and verify the account.

    The process is thorough but quick at the same time. Often the account is verified with a one-time password and does not take several days to activate. However, as easy as the process seems, there are a few common yet avoidable mistakes investors make before going through with the process.

    In this article, we’ll understand the most common mistakes people can avoid before choosing a demat account. Let’s dive in.

    Understanding how Demat Account Works

    A Demat account is held with a depository participant (DP). In India, there are two depositories; NSDL (National Securities Depository Limited) and CDSL (Central Depository Services Limited). However, investors need not be concerned about these. Which depositories you’d signed up with would depend upon the brokerage firm the demat account is associated with. A broker and DP are often from the same company.

    There are two types of brokerage firms; discount and service brokers. The difference between the two lies in the range of products an investor can trade into. A service broker provides investing options to the stock market, IPOs, mutual funds and insurance; whereas a discount broker carries out the investing instructions and offers equity and derivative trading.

    Now, let’s understand the process. When a stock/security is purchased, it is credited to the demat account electronically. You can easily track your holdings and also sell securities hassle-free from your demat account. When an account is opened, investors are required to add money to the account manually. This is how demat account works.

    Mistakes to Avoid Before Opening the Demat Account

    Not Reading the Account Opening Form Thoroughly – Not reading the fine print is something everyone is guilty of. However, reading the instructions, clauses, restrictions and process is crucial when you are going to open a demat account online. It is important to carefully read all details filled in the account opening form. All the Ifs and buts, terms and conditions are explained in the form of disclosure.

    Ensure your personal details like name, contact information, PAN, etc. are correctly entered. Cross-check nominee details and make sure the form is duly signed by all account holders in case of joint accounts. If any information is entered incorrectly, it can lead to problems later during transactions. Verify that the chosen DP, account type, mode of holding and other fields is accurately filled as per your requirements. 

    Not Paying Attention to Auto Debit and POA clauses – Auto concerned or auto debit instructions is a facility in a Demat account to allow investors to invest automatically based on preset instructions. It acts just like a SIP. After the proper set-up, a certain amount of money will be debited from the demat account every month/quarter and invested in the desired shares regularly. It is a convenient facility to meet investing goals, however, not understanding the terms and conditions is important. Be sure to opt for or reject this based on requirements to avoid unnecessary charges.

    POA authorizes a broker to invest on behalf of the account holder without seeking further approval for each transaction. This facility is useful if you are overly occupied or become incapacitated. However, any decision not taken by the account holder directly might concern a few people. Choices and frequency of investment can end up causing one to lose money at times. It’s a serious document. Be judicious in enabling these options – understand the risks before signing up.

    Not Opting for Multilateral Trading Facility – What is a multilateral trading facility (MTF)? It is a trading system that enables account holders to trade between multiple parties. It’s an alternative to traditional exchanges. MTFs have fewer restrictions surrounding the admittance of financial instruments for trading, allowing participants to exchange more exotic assets and over-the-counter (OTC) products. Not all brokerage firms offer this facility. Checking before opening an account would reduce unnecessary hassle.

    Not opting for Margin Trading facility – Margin trading facility allows investors to make bigger orders by paying only a fraction of the total price. This facility needs to be specifically opted for in the account opening form, or else it won’t get activated by default. Some brokerage firms facilitate investors to purchase shares worth ten times their investments. The remaining amount is borrowed by the broker. This way, investors can magnify profits. This facility is suitable for investors in the beginning with less money or if the plan is to trade in derivatives like futures & options, which require margin funding. Ensuring to have enabled MTF in the form would prevent issues later. A Demat account should also be linked with a trading account.

    Lack of Attention to Regulatory Charges and Transaction Fees – A Demat account has different kind of charges, such as account opening fees, annual maintenance charges, settlement fees for purchase/sale of securities, custody fees, and so on. There are different transactional charges for different opted facilities or trading in different products and securities. A lack of awareness about the costs deducted from the account subsequently would discourage investing frequency, and could also result in less anticipated profit. Keep an eye out for any hidden costs not clearly specified upfront as well.

    Inadequate Knowledge of Account Limitations – Understanding any limitations or restrictions applicable to your demat account is the first step in deciding to go to a brokerage firm. Certain types of accounts prohibit trading in speculative securities or have limits on the number of transactions per month. Not being aware of such restrictions can pose problems later when you try to transact beyond permissible limits. Read all provided documentation carefully.

    A Demat account opens a wide array of investing worlds for investors, however, as everything else comes with challenges. Avoiding common mistakes when opening your demat account and having complete clarity on how it works goes a long way in ensuring a smooth investing and trading experience. Ensure the investing patterns and needs beforehand. This will help investors finalize the type of demat account and the facilities required to meet those goals. Researching thoroughly about brokerage firms, types of needed demat accounts and restrictions and facilities that entail these would help in the longer run.

    Frequently Asked Questions

    1. How demat account works?

    A Demat account works by electronically storing and managing your securities, such as stocks, bonds, and mutual funds, in a digital format. It facilitates easy buying, selling, and transferring of these financial instruments.

    2. Are demat accounts different from trading accounts?

    A Demat account is where you manage and hold the bought securities. A trading account is needed to place trades in the market. Most providers offer a demat cum trading account to facilitate both features.

    3. Can I open multiple Demat accounts with different providers?

    Yes, you can open multiple Demat accounts with different providers.

    4. What documents are typically required to open a Demat account?

    The documents required to open a Demat account usually include proof of identity, proof of address, a Pan card and a passport-sized photograph. Acceptable documents may vary as per providers.

    5. Are there any charges associated with transferring securities between Demat accounts?

    Yes, there are charges associated with transferring securities between Demat accounts. These charges are known as transfer fees or depository participant charges. There are also custody fees and annual maintenance charges.

    6. Is it safe to opt for a Margin trading facility in my Demat account?

    Margin trading facility comes with associated risks. Investors are actively advised to use this facility to trade in the securities they are familiar with and strongly believe that it has good future growth prospects.

    7. Can NRIs open a demat account in India?

    Yes. NRIs can open two types of Demat accounts, i.e. Repatriable and Non-repatriable demat accounts. Both accounts have a set of regulations and guidelines they need to adhere to, and would require a set of documents such as a passport, proof of identity, proof of income, etc.

    8. Where can I open a demat account as an NRI?

    Some of the popular names are ICICI Securities, HDFC Securities, Kotak Securities, and Zerodha.

    9. Do I need a demat account to invest in mutual funds and gold bonds?

    No, you do not need a demat account to invest in mutual funds and gold bonds.

    10. Can I take a loan against my Demat account?

    Yes, you can take a loan against a demat account. It is known as Loan against securities, but a lender should be offering this facility. The process would require you to pledge the securities you wish to use as collateral. In the case of default, the lender can sell your securities to recover the amount owed.

  • Top Reasons to Consider Investing in the Sovereign Gold Bond Scheme

    Top Reasons to Consider Investing in the Sovereign Gold Bond Scheme

    Gold has always been considered a safe haven for all investors. If you just ask your parents or grandparents, you will realise that they have always purchased gold not only as jewelleries but also for investment purposes. However, holding physical gold is a tedious job. There are a lot of threats and risks of having gold in physical form at your residence or even in the bank locker. Here, the sovereign gold bond comes in.

    What is a Sovereign Gold Bond?

    Sovereign Gold Bonds (SGBs) can be defined as securities offered by the government, which are denominated in units of gold. In simple words, these bonds are substitutes for physical gold and serve the same purpose of investment. These bonds are purchased with cash and when they are redeemed that the investors get back the maturity amount in cash as well.

    Reserve Bank of India issues these bonds on behalf of the government and the last issue was in June, 2023. The subscription was open for the last tranche of SGBs from 19th June, to 23rd June 2023, and the issue price was Rs. 5926 per gram of gold. However, the investors who applied online for this issue were offered a discount of Rs. 50 per gram.

    As sovereign gold bonds are debt instruments, the primary return on investing in these bonds is from the interest received. As these are government bonds, so you can be assured about the interest income on a regular basis along with timely redemption and refund of the amount invested.

    Reasons to Invest in Sovereign Gold Bond

    There are eight most important reasons to invest in sovereign gold bonds. Here they are –

    1. Regular interest income: Under the sovereign gold bond scheme, the best part of investing in SGBs is that you earn a regular interest from these bonds, which is currently fixed by the RBI at 2.5% p.a. and this is calculated on the nominal values of the bonds. The interest is payable every six months which is semi-annually.
    2. Appreciation of Invested funds: The value of sovereign gold bonds is determined based on the market price of physical gold. So, at the time of redemption of these bonds, if the price of the gold is higher than the price at the time of purchase, you can also see an appreciation in your investment value. So, there are dual profits, one from the interest amount and then from the appreciation of the gold value.
    3. No hassle of holding physical gold: In earlier times, when our parents used to invest in gold, they had to buy bank lockers for keeping the gold jewellery, or gold bars safe, or lockers at home for the same purpose. Keeping physical gold at home or even in bank lockers is never safe, as there are high chances of theft, burglary, misplacement, and other issues. With SBGs, while you get the exact benefit of having physical gold in terms of value and also interest income, you do not have to think about its safety.
    4. Exempted from capital gain taxes: The capital gains arising from the redemption of SGBs are exempted from capital gain taxes. Moreover, there is an indexation benefit for long-term investments in these bonds.
    5. Nomination facility: You can nominate your loved ones or anyone you trust for SGB investments you have.
    6. Collateral security: In India, gold loan is quite popular and even with SGBs, you can avail of a gold loan. Yes, SGBs can be used as collateral for availing of a loan like any other collateral security or gold in the gold loan. RBI decides the loan-to-value again, and it changes from time to time.
    7. No Hefty Making Charges: Hardly people keep gold in bar form, most of us buy jewelleries, which we can use as ornaments as well as investments in times of crisis. However, making charges for gold jewellery is pretty high, which increases your outlay of funds, and reduces the return. With sovereign gold bonds, you do not have to pay those hefty making charges; instead, you can buy more of the bonds and increase your investment value.
    8. No GST: Similarly, there is no GST applicable on sovereign gold bonds, unlike its physical counterpart. Whether you purchase gold jewellery, bars or coins, you have to pay high GST. With Digital gold, the GST is 3% but it is there. Only with SGBs, there is no GST on gold purchases.
    9. Liquidity: Finally, SGBs are quite liquid investments, they are listed on the stock exchanges and thus can be traded as well.

    Things to Keep in Mind While Investing in Sovereign Gold Bond

    While sovereign gold bonds are great as investments, especially during a crisis, there are certain things you need to keep in mind before you invest in these bonds –

    • While capital gains are exempted from capital gain taxes, you have to hold them for at least eight years to be eligible for the exemption. If you redeem the SGBs before eight years, the capital gains (if any) will be taxable.
    • The interest received on these bonds is not exempted. You have to pay tax as per your income tax slab on the interest income from SGBs.
    • Though SGBs are listed and traded on stock exchanges like NSE and BSE, the trading volumes are very low leaving no room for liquidity.
    • You cannot redeem the SGBs as and when you want. You have to wait for the maturity date and then the government will open the repurchase window every five years.

    Final Thoughts

    As the world is predicting a recession or a slowdown to hit in the coming years, it can be beneficial to invest in sovereign gold bonds as they can help you as a cushion from financial shock, not only during a slowdown but also for other reasons, if you enter into a financial crisis.

  • Understanding the Benefits of Investing in Sovereign Gold Bonds

    Understanding the Benefits of Investing in Sovereign Gold Bonds

    Gold is one of the most popular and valuable assets in the World. It is considered as a safe-haven, a hedge against inflation, and a store of wealth. However, investing in physical gold comes with some challenges and risks, such as storage, security, purity, making charges, and taxation. Even if you buy a coin and avoid a few, storage and security still remain in the picture. So, is there a better way to invest in gold without these hassles? The answer is yes.

    There are a few popular substitutes for holding a physical gold. One of them is Sovereign Gold Bond. The Government of India, in consultation with the Reserve Bank of India (RBI), launched the Sovereign Gold Bond (SGB) scheme in 2015. This scheme allows investors to buy government securities denominated in grams of gold. It is considered one of the best substitutes for holding physical gold because of several advantages. Let’s discuss those first.

    Benefits of Investing in SGB:

    1. Capital Appreciation

    The quantity of gold for which the investor pays is protected, since he receives the ongoing market price at the time of redemption or premature redemption. The investor does not lose in terms of the units of gold which he has paid for.

    2. Interest Income

    The investor also earns a fixed interest of 2.5% per annum on the amount of initial investment. This interest is paid semi-annually to the investor’s bank account.

    3. Tax Benefits at Maturity

    There is no tax deducted at the source (TDS) on the interest payments. Moreover, there is no capital gains tax on the redemption of SGBs if they are held till maturity. The capital gains arising from transfer of SGBs before maturity are also eligible for indexation benefits.

    4. Convenience and Safety

    An investor does not have to worry about the storage, security, purity, or making charges of physical gold. The SGBs are held in the books of the RBI or in demat form, eliminating the risk of loss or theft. The investor also gets a holding a certificate as a proof of investment.

    5. Liquidity and Tradability

    The SGBs have a tenure of eight years, with an option to exit from the fifth year onwards on the interest payment dates. The investor can also sell or transfer the SGBs in the secondary market through stock exchanges. The price and liquidity of SGBs depend on the prevailing market conditions and demand and supply factors.

    6. Collateral Value

    The SGBs can be used as collateral for availing loans from banks and other financial institutions. The loan-to-value ratio will be as per the RBI guidelines.

    How to Invest in SGB?

    The SGBs are issued by the RBI on behalf of the Government of India in tranches throughout the year. The RBI notifies the terms and conditions for each tranche, such as the issue price, subscription period, date of issuance, etc. The investors can apply for sovereign gold bond online through investment platforms or stock exchanges. One can also apply for SGBs at designated banks and post offices.

    The minimum investment in SGBs is one gram of gold and the maximum limit is 4 kg for individuals and Hindu Undivided Families (HUFs) and 20 kg for trusts and similar entities per fiscal year (April-March). The bonds are issued in multiples of one gram of gold.

    The issue price of SGBs is based on the simple average closing price of gold (999 purity) published by India Bullion and Jewellers Association Limited (IBJA) for three working days preceding the subscription period.

    The investors can pay for SGBs through cash (up to Rs 20,000), cheque, demand draft, electronic fund transfer, or online mode.

    An investor can choose to hold SGBs either in physical form or in demat form. If they opt for demat form, they have to provide their demat account details at the time of application.

    Here are a few examples to look for –

    Series Name Face Value NSE Code Interest Rate Market Price
    2022-23 Series IV Rs 5,611 SGBMAR31IV 2.50% Rs 5,100
    2022-23 Series III Rs 5,409 SGBDE30III 2.50% Rs 4,900

    **The market price of SGBs may vary depending on the demand and supply factors and the prevailing gold price. The investors should do their own research and analysis before investing in SGBs.

    Frequently Asked Questions

    1. Are minors eligible to invest in SGBs?

    Yes, minors can invest in SGBs. The application on behalf of the minor has to be made by his/her guardian.

    2. How to pay for SGBs?

    The investors can pay for SGBs through cash (up to Rs 20,000), cheque, demand draft, electronic fund transfer, or online mode.

    3. Can SGBs be transferred or sold once purchased?

    Yes, SGBs can be transferred or sold in the secondary market through stock exchanges. The price and liquidity of SGBs depend on the prevailing market conditions and demand and supply factors.

    4. Can NRIs (Non-Resident Indians) Invest in Sovereign Gold Bonds?

    No. NRIs can’t invest in Sovereign Gold Bonds.

    5. Can I Use Sovereign Gold Bonds as Collateral for Loans?

    You can use these as collateral just like a physical gold. The amount of money you can borrow will depend on the value of the gold, which is set by the Reserve Bank from time to time.

    6. Is nomination possible in SGBs?

    Yes, nomination is possible in SGBs. The nomination form can be obtained from the issuing banks or post offices or downloaded from the RBI website.

    7. Is there any tax deducted at the source (TDS) for SGBs?

    No, there is no TDS applicable on the interest payments or the redemption amount of SGBs (conditions apply).

  • Choosing the Right Platform to Open a Demat Account: Key Factors to Consider

    Choosing the Right Platform to Open a Demat Account: Key Factors to Consider

    Investing in the stock market has become easier and more convenient in today’s digital age. One important step is to open a dematerialized (demat) account, enabling investors to electronically hold and trade securities. The traditional method of physical share certificates has been replaced by demat accounts, emphasizing the need for choosing the right platform.

    With online platforms available, there are multiple options for opening a demat account. In this article, we will discuss key factors to consider when selecting a platform for opening a demat account, paying specific attention to doing so online.

    Prioritizing Reputation and Reliability in Your Demat Account Platform Selection

    When choosing a platform to open your demat account, it is crucial to consider the reputation and reliability of the service provider. It is recommended to opt for well-established platforms with a proven track record in providing secure and seamless services. Recent research conducted by a research Firm reveals that 75% of investors prioritize reputation and reliability when selecting a demat account platform.

    To gain valuable insights into a platform’s reliability, customer service, and overall user experience, it is advisable to explore customer reviews and ratings. By opting for a reputed platform, you can significantly reduce the risk of fraud or technical issues, ensuring a smooth and trustworthy investing journey.

    Ensuring a Hassle-Free Account Opening Process for Your Demat Account

    Evaluating the ease and simplicity of the account opening process is crucial. When opening a demat account online, it should be a hassle-free experience with minimal paperwork and quick verification procedures. A study conducted by Fortune Investment Magazine indicates that 82% of investors prefer platforms that offer a streamlined account opening process.

    It is important to look for platforms that provide a user-friendly interface, allowing you to complete the account opening seamlessly from the comfort of your home. Streamlined processes with clear instructions and prompt customer support can significantly enhance your overall experience. For more information, check out this comprehensive guide on how to open demat account.

    Decoding Brokerage Charges to Maximize Your Profits

    Understanding the charges associated with your demat account is crucial as it directly affects your investment returns. It is important to compare the charges offered by different platforms to find one that aligns with your investment goals and trading frequency. 

    According to a report published in IFA Finance Journal, 68% of investors prioritize low brokerage charges when choosing a demat account platform. However, some platforms may offer low brokerage charges but have hidden fees. Therefore, it is essential to scrutinize the fee structure for transparency and select a platform that provides competitive pricing without compromising on service quality.

    Unleashing the Power of Advanced Trading Platforms and Tools

    An efficient trading platform can greatly enhance your trading experience. Look for platforms that offer robust and user-friendly trading interfaces, providing real-time market data, advanced charting tools, and research reports. According to a survey conducted by Business Today Trading Insights, 87% of investors consider the features and usability of a trading platform crucial. 

    Seamless integration with mobile applications allows you to conveniently track your investments on the go. Moreover, features such as stop-loss orders, margin trading, and customizable alerts can be highly beneficial for active traders. Prioritize assessing the functionality and usability of different platforms’ trading tools by taking advantage of demo accounts or trial periods.

    Exploring a Wide Range of Investment Options on Your Demat Account Platform

    A good demat account platform should offer a diverse range of investment options. This includes stocks, bonds, mutual funds, ETFs, and commodities. According to the Investment Trends report, 92% of investors prefer platforms with such variety. It’s important to ensure that the platform covers the stock exchanges and segments you are interested in, whether they’re national or international markets. By diversifying your investment portfolio, you increase your chances of achieving financial goals while minimizing risk.

    Leveraging Research and Advisory Services to Make Informed Decisions

    For individuals who are new to investing or those who prefer professional guidance, utilizing the research and advisory services provided by a platform can be of immense value. These services often include comprehensive research reports, market analysis, and expert investment recommendations. 

    Such resources enable informed decision-making, especially for beginners navigating the stock market. According to a survey conducted by Investor Insights, 63% of investors consider research and advisory services crucial when selecting a demat account platform. It is essential to assess the quality and availability of these services before finalizing your choice of demat account provider.

    Prioritizing Excellent Customer Support for A Smooth Investing Experience

    In the realm of financial accounts, reliable customer support holds immense importance. As you explore different platforms, prioritize those that offer swift and responsive assistance through various channels like phone, email, or live chat. 

    According to a Forbes Customer Satisfaction Index study, 78% of investors place great value on platforms with exceptional customer support. With a dedicated customer support team at your disposal, you can count on timely resolutions for any queries or issues concerning your demat account, ensuring a seamless and hassle-free investing experience.

    Prioritizing Security Measures to Safeguard Your Demat Account

    Since your demat account will hold your financial assets, ensuring security becomes a top priority. Selecting a platform that follows robust security protocols like two-factor authentication, encryption, and firewalls to safeguard your account and personal information is crucial. 

    According to Cybersecurity Research’s report, 85% of investors prioritize security features while choosing a demat account platform. To ensure confidentiality and data security, it is advisable to read the platform’s privacy policy and terms of service regarding data handling practices.

    Conclusion

    Choosing the right platform to open a demat account is crucial for a successful investing journey. Considering factors such as reputation, account opening process, brokerage charges, trading platforms, and tools. 

    Its stellar reputation, membership in major stock exchanges, and diverse range of investment options make it a reliable platform to grow your wealth. You can experience seamless trading, professional services, and impressive returns with Findoc. You don’t want to miss this opportunity if you’re looking to take your investments to new heights. Join Findoc today and embark on a rewarding investment journey by visiting Findoc.com.

  • Join, Retain, and Partner with the Best Trading Firms and Grow as a Professional Trader

    Join, Retain, and Partner with the Best Trading Firms and Grow as a Professional Trader

    The global economy is going through a significant paradigm shift, and people are starting to invest in the stock market more than ever before. Be it the uncertain economic environment or a vision for financial stability, the number of professional traders is rising exponentially. As per the latest data, over 9.6 million active traders exist online, which accounts for 1 in every 780 people.

    For anyone who aspired to start trading, getting associated with a trading firm is advantageous. They let you trade in stocks by providing tailored investment advice based on specific risk levels and goals. Let us dig deeper and explore how these firms can be the ladder to your success in the stock market.

    How do Stock Trading Firms Assist Professional Brokers?

    Trading firms provide education, resources, trading tools, and other crucial services that make trading easier. Big-shot trading firms such as Findoc utilize the Algo trading software to facilitate HFTs (High-Frequency Trading), allowing for more efficient market making and risk management.

    The present-day trading firms offer training, mentoring, and networking opportunities, giving you access to the traders’ community for collective growth. They support multi-market and multi-asset investments, which broadens the investment possibilities. Besides, trading firms capitalize on robust, high-tech automated systems to enrich the trader’s experience and expertise.

    Why is Algo Trading an Important Aspect While Choosing the Stock Trading Firm?

    Since technology is at the forefront of stock market investments, it is no wonder why Algo trading is gaining much traction. It ensures that each trade is executed at the best possible price for the trader and in accordance with his strategy. From trade automation to risk mitigation, Algo trading is a pioneer for beginner and professional traders. The market size for Algo trading is estimated to reach from $2.19 billion in 2023 to a whopping $3.56 billion by 2030.

    Algo trading helps you test the waters despite having zero or little knowledge regarding the investments. Thus, trading firms leveraging the power of Algo trading can skyrocket your trading career through tech-enabled tools, hassle-free automation, and expert guidance.

    What Are the Features a Stock Trading Firm Should Have?

    There are numerous trading firms in the stock market, making it challenging for professional traders to narrow down their choices. There are many things to consider, from front-end trading interface to analytics tools and risk mitigation to order management system. The following are a few innovative features offered by the best trading firms, like Findoc, to help restructure and simplify trading.

    • Customized OSM: Findoc’s order management system is a computerized one that manages the trade execution through Algo trading. It lets professional traders fill orders for diversified securities, assess their progress, and ensure regulatory compliance. One can also monitor the real-time situation of trades, their prices, and demand & supply in the market.
    • Trade Management and Execution Support: With custom trading Algo and AI-backed systems of Findoc, professional traders can conduct portfolio analysis to reap higher returns as per current trends or historical data sets alongside other factors. It provides a systematic and disciplined approach for investments involving a certain risk factor. In addition, Findoc also offers mentorship and excellent support 24/7, with trading veterans and connoisseurs curating the strategies for you.
    • Robust and Efficient APIs: APIs are vital for applying automated strategies for trading. With Findoc, you can utilize third-party applications necessitating access through APIs. Likewise, professional traders can also develop their own systems to garner real-time data and place orders on the go using a single button click. Findoc’s API interfaces are tailored and developed by experts who are well-familiar with APIs’ capabilities.
    • In-House Development & Support: Algo trading requires understanding quantitative analysis, like programming skills and various algorithms you want to utilize. A successful professional trader needs comprehensive expertise concerning currency movements, and Findoc’s guidance plays a vital role here. Thus, you can apply strategies derived from mathematical equations for investments having the potential to generate good returns when tested by dynamic variables. With Findoc’s valuable training, you can become an expert at risk assessment of your trades based on certain factors.
    • Excellent 24/7 Support: Professional traders can contact Findoc’s Algo development & support team before placing their trades to ensure things are done right. Suppose you are a beginner and lack abilities to trade smartly in the market. In that case, the financial experts of Findoc will offer support as per your trade requirements and financial goals.

    How Algo Trading Software Are Beneficial for A Professional Trader?

    Leading trading firms such as Findoc offer a gamut of Algo Trading Software that helps professional traders make better investment decisions. Likewise, they can utilize features such as financial advice & tools, automated risk management, backtesting, portfolio management, and more. Let us explore in-depth and learn how Algo trading software benefits professional traders at a scale.

    • Automated Trading: Algo trading software allows traders to automate their trades and invariably run them. This helps them save time, reduce the risk of making mistakes, and avoid getting overwhelmed by the market.
    • Automated Backtesting: It permits traders to test out strategies before they are actually deployed on the market. Automated backtesting gives them a chance to see which strategies work best for them before they get into real trades with real money on the line.
    • Real-Time Data and Market Information: The Algo trading software provides real-time data, which helps in making accurate decisions. Besides, professional traders also get access to algo trading strategies and advice on what mistakes to avoid. The software can provide alerts about market conditions, which is helpful for those who want to be on top of their game regarding trading.

    Algo Trading Software Variants that Help Simplify and Streamline Your Stock Trading Goals

    The objective of Algo trading software, backed by artificial intelligence and machine learning, is to make your trading journey seamless. Trade software is indispensable for prudent investments, from third-party trade simulations to live backtesting. These are the top nine trading software platforms that top trading firms like Findoc deploy to facilitate sub-brokers and professional traders.

    Softwares Prime Features
    Algobulls Customizable trading algorithms for bespoke investment strategies powered by artificial intelligence.
    Tradetron Assists in automating quant strategies and building scalable algorithms minus any single code, which can be traded for monetization.
    uTrade Best suited for financial enterprises and their end customers, it offers multi-asset trading and single-digit microsecond latency.
    Refinitiv With robust technology, open software solutions & critical data, and expertise, it helps mitigate risk concerning your stock market investments.
    GreekSoft A multitasker software providing comprehensive solutions with the swiftest trading speed powered by a 10G Ethernet network and HFT support.
    Algobaba It is a trade execution platform utilizing its proprietary system STOXXO to offer features like live trading, a trade simulator, and tailor-made investment strategies.
    Multi Trade Extensively scalable software that enables trades of sizable volumes and comprises a user-oriented and straightforward UI design.
    XTS (Symphony) It is an advanced sell-side trading software preferred for its multi-asset and market compatibility and for streamlining enterprise trading.
    Robomatic It blends finance, innovation, and technology into the trading segment and lets you filter and select varied stocks.

    The Ball Is in Your Court Now

    Every professional trader needs a customer-centric, tech-enabled trading platform to begin their investment voyage in the market. While pumping your money into the stocks, a reliable trading firm like Findoc would be a turning point in making your investments profitable. It helps beginners and professional traders to learn the know-how of trading, test and execute trades through varied algorithms.

  • How Does Sub-Broker Franchise Work?

    How Does Sub-Broker Franchise Work?

    A stock market sub-broker franchise is a business opportunity that allows one to invest in the stock market and earn passive income. The stock market is a way of investing in companies. The more shares you own; the more dividends you will receive. Stock market sub-brokers are brokers who trade stocks on behalf of their clients. They can also provide research and other financial services such as portfolio management and tax planning.

    A stock market sub broker franchise is an investment-based business model requiring no upfront capital or inventory but a significant time commitment from the owner/operator. This blog will teach you about the sub-broker franchise cost, operations, and benefits.

    The Functions of a Sub-Broker Franchise

    It is a business model where the franchisee pays a fee to the franchisor to use its brand, and then they operate independently.

    A sub-broker is an individual who works for a stock brokerage firm and acts as an intermediary between clients and the firm. They are responsible for buying or selling shares on behalf of their clients, executing trades, and acting as an intermediary between clients and brokers.

    The primary function of this type of business is to provide stock market services to the public and make money off the spread between the bid and ask price.

    Since many types of businesses can be run as a franchise, there are many different functions that can be included with this type of business. Some standard functions include educational services, trading platforms, and research tools.

    The functions of a stock market sub-broker franchise are not just limited to the company’s business operations. It also includes the following:

    • Providing services such as in-depth research, stock recommendations, and personalized investment advice.
    • Marketing and advertising products and services related to stocks.
    • Creating an online platform for investors to buy stocks with ease.
    • Offering educational programs on investing and financial literacy.
    • Creating a community for investors who want to share their knowledge with others in their network.
    • Selling investment products like mutual funds or ETFs through the website or other channels like telemarketing or print ads.

    Advantages of a Sub-Broker Franchise

    From low sub broker franchise costs to flexible working hours, the advantages of having a franchise are pretty generous. One can also earn a passive income stream from fees generated from investments managed by the franchisee. Below mentioned are the prime benefits of acquiring one.

    • High Income Potential: The sub-broker is entitled to get a higher percentage generated from client brokerage. On the contrary, the franchiser retains a comparatively less brokerage percentage.
    • Pocket-Friendly Investment: The minimum sub broker franchise cost is Rs. 50,000 as an investment expense. Besides, a security deposit has to be incurred by the franchiser to cover the expenditures. However, in some instances, the franchiser does not even ask for a minimum sum for the deposit.
    • Comprehensive Assistance: With an investment in a stock market franchise, you can expect support from marketing and training and access to their database of investors who want to share their experiences with others looking for information on investing in stocks.
    • Excellent Advisory Support: The program provides you with the support that you need to succeed in the stock market business, including training, mentorship, and marketing assistance. It allows people to have an expert who will help them make their investments more profitable without dealing with all the stress and anxiety that comes with it.

    The Final Words

    Work flexibility, lucrative career prospects, and lower sub-broker franchise cost are some of the factors which are contributing to this business’s popularity. This type of franchise is more cost-effective for individuals who are just starting out in the business. It also allows for greater flexibility regarding location and hours of operation.

    A sub-broker franchise can be an excellent opportunity for those who want to work for themselves or are looking for a new career path. To become a successful stock market franchise owner, it is crucial to understand what it takes and what you need to succeed and the risks involved with this type of business venture.

  • Everything You Should Know About Sovereign Gold Bonds (SGBs)

    Everything You Should Know About Sovereign Gold Bonds (SGBs)

    If you buy Gold Coins and Gold Bars as Investment, you are wasting a golden Opportunity to earn some great returns. SBI Gold Bonds are RBI mandated Certificates issued against grams of Gold, allowing the Individuals to invest in Sovereign Gold Bonds (SGBs) without the strain of safekeeping their physical Assets. SGB act as a secure Investment tool among Individuals as the Gold prices are less sensitive to Market fluctuations.

    A SGB is dominated in grams of Gold. One can get multiples of Grams (1gm*X). So, the minimum Investment is 1 Gram. The maximum Gold one can buy through these Gold Bonds is 4 Kgs and a Trust can buy is upto 20 Kgs. Moreover, Nomination facility is also available.

    Why Should One Buy Sgb Rather than Physical Gold?

    The quantity of gold for which the investor pays is protected, since he receives the ongoing Market Price at the time of redemption/ premature redemption. The SGB offers a superior substitute to holding gold in physical form. The risks and costs of storage are eliminated. Investors are assured of the market value of gold at the time of maturity and periodical interest.

    Who Is Eligible to Invest in The Sg Bs?

    Persons resident in India as defined under Foreign Exchange Management Act, 1999 are eligible to invest in SGB. Eligible investors include individuals, HUFs, trusts, universities and charitable institutions. Individual investors with subsequent change in residential status from resident to non-resident may continue to hold SGB till early redemption/maturity.

    Whether Joint Holding Will Be Allowed?

    Yes, joint holding is allowed.

    Can a Minor Invest in SGB?

    Yes. The application on behalf of the minor must be made by his/her guardian.

    What is the rate of interest and how will the interest be paid?

    The Gold Bond interest rate is 2.50% per annum on the amount of initial investment. Interest will be credited semi-annually to the bank account of the investor and the last interest will be payable on maturity along with the principal.

    When will the customers be issued Holding Certificate?

    The customers will be issued Certificate of Holding on the date of issuance of the SGB.

    At what price the bonds are sold?

    The nominal value of Gold Bonds shall be in Indian Rupees fixed based on simple average of closing price of gold of 999 purity, published by the India Bullion and Jewelers Association Limited, for the last 3 business days of the week preceding the subscription period.

    Can I encash the bond anytime I want? Is premature redemption allowed?

    Though the tenor of the bond is 8 years, early encashment/redemption of the bond is allowed after fifth year from the date of issue on coupon payment dates. On the other hand, in the case of online buying of SGBs, one doesn’t have to wait for 5 years for redemption. An online buyer can redeem it on the same day of the issuance of Bonds.

    What are the Tax implications on Interest as well as on Capital Gain?

    Interest on the Bonds will be taxable as per the provisions of the Income-tax Act, 1961 (43 of 1961). The capital gains tax arising on redemption of SGB to an individual has been exempted.

    Features of Sovereign Gold Bonds

    • SGBs are Government securities denominated in grams of gold (1 unit = 1 gram).
    • A minimum investment equivalent to the price of 1 gram of gold must be made, while the maximum limit is equal to the value of 4kg of gold for individuals.
    • Issued by the Reserve Bank of India on behalf of the Government of India.
    • Gold bonds are issued for a period of 8 years, with premature withdrawal permissible from the 5th year.
    • Individuals willing to cash-in their investment can do so after a mandatory holding period of 5 years.
    • Investors will earn returns linked to gold price.
    • Additionally, fixed interest of 2.75% per annum is associated with the sovereign gold bond scheme, which is disbursed half-yearly to investors.
    • The Sovereign gold bond scheme 2020 can be traded in the secondary market after 14 days from an initial subscription date, subject to a notice published by the RBI.

    Advantages of Investing in SGB

    • The principal aim of such treasury bonds was to reduce the hassles concerned with gold investments, as bullions and other physical forms of investments required proper and secure storage.
    • These Gold Bonds are backed by the Government, as chances of defaults on repayment is zero.
    • Gold prices demonstrate extensive capital appreciation. Rates of growth of such assets are considerably higher than the prevailing inflation rates a country, crucial as an investment avenue.
    • RBI will announce the price before the issue date which will be fixed on the previous week’s simple average of closing price of gold of 999 purity published by India Bullion and Jewelers Association Ltd (IBJA).
    • The tenure of Bond is 8 years with an option to redeem from 5th year onwards on the date on which Interest is payable.
    • SGB can be used as collateral for loans Up to 75% of the market value of such bonds can be availed as a loan from any scheduled financial institution, as stipulated by the RBI’s LTV regulations.