Sovereign Gold Bond - The Best Way To Invest In Gold

Clients’ portfolio at present are being affected by many factors such as:

  • Equity market volatility
  • Low yields on Fixed Income
  • Increasing risk of defaults by corporations based on business down turn
  • Geo-political uncertainties

In addition to these, uncertainty about their own future, increases the risk perception and a need to dampen volatility.

We believe that the answer lies in going back to basics – in creating an all-weather portfolio which allows for a meaningful participation in rising markets while offering protection in periods of stress.

One of the tools to build a portfolio is “diversification” across asset classes.

Historically, different asset classes move in different directions and it is not possible for anyone to predict the direction of any asset class in the short term.

Creating a portfolio diversified across assets, helps the risk on the portfolio to be reduced substantially.

Historical Performance Of Asset classes (Last 10 Calendar years)

Source:MOPWM;Equity is represented by Nifty 500; Debt is represented by CRISIL Composite bond Index; Liquid is represented by CRISIL Liquid fund Index & Gold is represented by gold spot price in INR terms

One such Asset Class that has been intrinsically par to four culture has been Gold. However, we rarely think of it as part of our Portfolio Asset Allocation–predominantly because it has been in the form of a physical asset, especially as jewellery.

As can be seen from the Asset return table above, Gold has been the topper forming asset class in 3 out of the last 10 calendar years.

We believe, strategically an amount equivalent to 5-10% of the overall financial portfolio should be invested in gold as part of the Asset Allocation.

We would recommend you to look at the “Sovereign Gold Bond”.

The bond (SGB), which is the first this financial year, in a series of six issues that are going to come up every month, offers a good opportunity for the investors to create an allocation through a SIP.

Benefits Of Holding Gold Via SGBs:

  • Minimum investment is 1 gm of gold at Rs 4,639
  • Discount of Rs 50/gm for investors applying through online/digital mode
  • Offers a 2.50% interest per annum, payable semi-annually. Physical gold, gold ETFs or Gold funds do not pay any interest
  • Purity (999 purity) is guaranteed as it has the backing of Government of India
  • Capital gains, if any, at maturity (8-years) is tax free. This benefit is exclusively available with SGBs only. Physical gold, gold ETFs or Gold funds do not qualify for this benefit

Key Information

Subscription Date: April 20-24, 2020

Sales channel: Sold through banks, Stock Holding Corporation of India (SHCIL), designated post offices, and stock exchanges (NSE and BSE)

Tenor: 8 years with exit option after 5th year to be exercised on the interest payment dates

Tradability: Tradable on stock exchanges within a fortnight of the issuance. However, liquidity on exchanges maybe a concern

View On Gold

Historically, gold prices rise steadily and more during times of economic turmoil. On the other end, when economies are stable and flourishing, gold values fall as investors prefer more adventurous and risky asset classes. Therefore, investing in gold can easily be a constant for the investors provided they are alert about the current market scenario and equipped with the latest financial planning software in India.

With uncertainties around Covid-19 crisis and the consequent slowdown in the global economies, policy makers across the globe shall unleash vast amounts of stimulus to support their economies. Given the vast stimulus packages, we expect inflation to pick up in the medium term. Real assets such as gold are regarded as a good hedge against inflation, may see surge in the prices. Bank of America Corp. raised its 18-month gold price target to $3,000 an ounce, more than 50% above its current price ($1,713/ounce).

However, strong dollar and lower jewellery demand could remain headwinds for gold prices in India.

Do write to us with your feedback at:

About Us

We are a fintech platform that provides solutions to Financial entrepreneurs to address their needs, of research, advisory, product access and client engagement. We empower entrepreneurs, to do more for their clients – while retaining their identity.

The team at Fintso has deep domain expertise on the Indian Investment space, Wealth management and cutting edge Technology.

Fintso has formed an internal Investment Committee : which has a focus on two things

  • Research and Advise given out
  • On-boarding new unique product / services on the platform.

The committee consist of Rajan Pathak (co-founder and MD), George Mitra (co-founder and CEO) and Kumarpal Jain (AVP and Head – 3rd Party products).

Meet the Investment Team :

Rajan Pathak

Co-Founder and MD

Rajan was a member of team who launched India’s 1st Multi-Manager and Fund of Funds AMC concept in India. He had also launched India’s 1st Multi Asset, Multi Product “WRAP” Accounts with online action capabilities. These WRAP accounts were Ranked with a 4 Star by Value Research for process and performance. With more than 2 decades of experience in financial markets, Rajan’s accomplishments include establishing successful B2B businesses supporting the financial entrepreneurs. His vast experience & deep understanding of advisor’s need help us build a strong framework of actionable insights.

George Mitra

Co-Founder & CEO

George was part of the Investment Committee and has been instrumental in designing the algorithms for products and advisory in his previous firm. George had helped design the Financial planning software and created the models for Asset Allocation using Efficient frontiers way back in ’00 while in Deutsche Bank. With over 25 years working with Ultra-HNI clients, George has a deep understanding on designing solutions for the end clients.

Kumarpal Jain

Head – 3rd Party products

Over the past 8-years in financial markets, Kumar has developed an intrinsic understanding on different asset classes and built an excellent product knowledge. This in-depth knowledge on markets and products would help us bring best of the advisory to investors to facilitate informed investment decisions. He was a core member of the team that helped create the processes that were used for Fund selection in both his previous organizations.

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