What is Sovereign Gold Bond Scheme? Finance Expert Explains Why Women Should Consider It For Smart Investing

Sovereign Gold Bonds (SGBs) are certificates issued by the RBI, representing grams of gold, offering individuals a way to invest in gold without worrying about the storage of physical assets. These bonds are considered a safe investment option, as gold prices are generally more stable and less impacted by market fluctuations. Due to the high demand and enduring popularity of gold, its value often appreciates over time, making it a promising investment choice.

To understand this better, we spoke to finance expert Mr Nish Bhatt, Founder & CEO of Millwood Kane International, based in London, England, who shared his valuable insights.

What is Sovereign Gold Bond Scheme?

The Sovereign Gold Bond (SGB) is a scheme introduced by the Government of India to provide investors with an opportunity to invest in gold without dealing with the challenges of holding physical gold.

According to Mr Nish Bhatt, Founder & CEO of Millwood Kane International, "The bond offers an assured return of 2.5% interest, paid bi-annually, in addition to the benefit of gold price appreciation. It is also tax-efficient and eliminates the hassles of storing gold or paying making charges."

Why Women Should Consider Sovereign Gold Bond Schemes For Smart Investing?

Investors can invest between 1 gram and 4 kilogrammes of gold through the Sovereign Gold Bond (SGB) scheme. As one of the largest gold markets globally, India's deep-rooted love for gold is well-known. Dr. Nish Bhatt explained, "Gold holds a special place in Indian culture, with women especially cherishing it as adornment. No festive celebration in India feels complete without buying gold. Women can consider Sovereign Gold Bonds as a strategic addition to their investment portfolio. Many parents in India start accumulating gold for their children early on; instead, we recommend exploring the gold bond scheme for better returns and convenience."

Dr Bhatt also emphasised that gold isn’t just for women. "Every investor should allocate a portion of their portfolio to gold. It should account for 5-15% of their investments, depending on their risk appetite, as gold acts as a reliable hedge and a stable asset."

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Features Of Sovereign Gold Bonds

• According to the Reserve Bank of India (RBI), Sovereign Gold Bonds (SGBs) are issued under the Government Security Act of 2006 by the RBI on behalf of the central government. This government-backed guarantee makes SGBs one of the most secure investment options in India, as there is no risk of default. However, the only risk involved is related to market fluctuations, which can lead to changes in gold prices.
• The SGB scheme was introduced in November 2015 under the Gold Monetisation Scheme to simplify gold investments by addressing the challenges associated with storing physical gold, such as bullion and jewellery.
• When purchasing these bonds, investors receive a holding certificate as proof of investment, which can also be digitised and added to Demat accounts for enhanced safety.
• SGBs offer significant returns over the long term, as gold prices generally appreciate steadily. During periods of stock market instability, investors often turn to gold because it retains or even increases in value, even when other financial instruments underperform.
• Additionally, gold typically outpaces inflation, making it an excellent choice for preserving and growing wealth. SGBs enable investors to benefit from the real appreciation of their portfolio's value, helping them build substantial wealth over time.
• The SGB scheme has a maturity period of eight years, making it ideal for those seeking a secure long-term investment option with significant capital growth potential.
• SGBs can also be used as collateral for loans. According to the RBI's Loan-to-Value (LTV) regulations, up to 75% of the bond's current market value can be borrowed from any scheduled financial institution.

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The Sovereign Gold Bond scheme stands out as a highly lucrative investment option due to its extensive benefits and minimal restrictions. It is an ideal choice for individuals with a low-risk tolerance who seek significant returns on their investments. As a government-backed initiative, it offers one of the most rewarding opportunities for wealth growth.

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