SGBs or Sovereign Gold Bond was one of the lucrative way to invest in the Gold where you are buying the Gold Bond from the government for 8 years and also you were getting 2.5% returns every year. So you were getting double benefits, the Gold increase benefit for 8 years as well as interest for 8 years which were tax free.
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But recent changes in the Budget has decreased the Gold amount substantially which means people who were investing in the SGB would not get a lot of money back for their Gold.
People invest in SGBs or Gold for Diversification as well as returns. We need instruments for investment which are as liquid as possible and the SGBs are not liquid and it fluctuates a lot if you are buying from secondary market. And that's why investing in Gold Funds make sense, Gold ETFs are also good but again in Gold ETFs if you are trading like buying and selling then it's good buy otherwise it's not good as it suffers from price nav deviations.
So for diversification and for longer term, SGB is not lucrative any more. So, now investing in the Gold Funds makes sense. I am investing in the Gold ETFs for profit purpose for my ETF Shop. And will start buying the Gold Funds I.e. Gold Mutual Fund for investment or diversification purpose. Having a 5 to 10% of your investment in Gold is actually a good portfolio diversification. Because it gives the hedge against your portfolio. And seeing the last 10 year returns, Gold can actually give you some good returns.
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