What Are Sovereign Gold Bonds? Are They Better Than FD, RD And Mutual Funds? EXPLAINED

Sovereign Gold Bond Scheme, FD and Mutual funds are all various types of savings instruments that investors can choose, depending on his/her investment objectives and risk tolerance.

New Delhi: The Sovereign Gold Bond Scheme 2023-24 Tranche 2 will be opened for subscription from today (Monday, September 11).

This is a great opportunity for investors to invest in gold, a safe and secure asset backed by the Central Government. The subscription for the Sovereign Gold Bond (SGB) Scheme 2023-24 Series II will begin on September 11 and will remain open till September 15, 2023.  RBI announced on Friday that the next installment of SGB has been fixed at Rs 5,923 per gram.

RBI (Reserve Bank of India) has announced that the sale of this gold bond will commence on September 11th. This will be the second tranche of SGB (Sovereign Gold Bond) for the current financial year. According to RBI, the price of SGB is fixed at Rs 5,923 per gram based on the simple average of closing price of gold of 999 purity.

After discussions with RBI, the government has decided to give a discount of Rs 50 per gram on the issue price to investors applying online and making the payment through digital mode. According to the statement, the issue price for such investors is Rs 5,873 per gram of gold. The issue will remain open from September 11th to September 15th.

Sovereign Gold Bonds Vs FDs Vs Mutual Fund: Which Is Better

Sovereign Gold Bonds (SGBs) provide investors with a reliable 2.5 percent return, guaranteed by the government on their initial investment. These bonds accrue interest semi-annually, with the final interest payment made upon maturity, along with the principal amount. While SGBs have an 8-year maturity period, they can be redeemed after the fifth year, thus meaning that there is a good amount of flexibility.

In contrast, fixed deposits (FDs) offer varying returns, ranging from 3.5 to 8 percent, depending on the deposit amount and tenure. FDs come with the added security of a Rs 5 lakh insurance cover provided by the Deposit Insurance and Credit Guarantee Corporation. This insurance cover becomes effective in the event of a bank liquidation, safeguarding the depositor's funds.

As compared to another savings instrument --mutual funds -- the latter can offer higher returns and greater diversification, depending on the market situation. However, the investment objectives and risk tolerance are different for different investors.

Unlike fixed deposits, which often involve a lock-in period, SGBs and government bonds offer high liquidity. They can be easily traded in the secondary market, providing investors with the opportunity to potentially earn better returns and the flexibility to exit their investment at any time before maturity.