Hi,
Invested Rs. 50,000 in Aug 2020 when gold price is Rs. 5,700/gm and Rs. 20,000 more in Nov 2020 when gold price is Rs. 5,010/gm.
Present sell rate of 1gm gold is Rs. 4632/gm
Is it good to sell some portion at loss and invest them in stocks ?
Hurts to see this. Please don’t take this as personal. You’ve basically entered at the peak of the bull run after seeing all the euphoria around gold and now want to abandon ship at the first draw down. August were the time you must’ve been All-In on Equity and not Gold. And since Equity is now on an All Time high you want to jump ship, back to square one with zero lessons learnt. Remember Gold is a great asset for LT & it is as volatile as equity
Seeing the terminologies you’ve used i believe you have invested in one of the ‘digital gold’ products offered in apps like Paytm, Kuvera, PhonePe etc.,. If so, this may rub salt in the wound - These ‘digital golds’ are not regulated by RBI or SEBI and hence the liability is totally on the mercy of the entity providing them (Augmont or MMTC). These attract 3% GST every time you buy, so there goes 3% for nothing. Did i mention that you can’t hold it for more than 7 years? Yes, you have to liquidate your holdings every 7 years on a FIFO basis. Buy-Sell spread is one of the worst I’ve ever seen in a financial product. In short, its a crappy product being pushed by marketing blitzkrieg.
Feels like end of the world huh, not really. Far from it. If you have the stomach for volatility and ready to ride for atleast 7-10 years without need for liquidation, move the funds to a Direct Gold Mutual Fund or an ETF and invest periodically a small sum
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I mostly agree with your post except -
Hindsight is 20/20. It is very easy to make such a statement post event. Did anyone really imagine (in Aug) the equity bull run we saw in last 5 months?
@Lokesh_Sanapalli : Things are volatile and will remain volatile in the near future.
If you’re new to markets, try this time to learn, learn and then learn some more. Dabble with small amount of money that you can afford to loose.
Also, next time if you plan to invest in Gold, try Sovereign Gold Bonds. Far better than Gold ETFs, Gold mutual funds, eGold or physical gold in terms of returns.
thank you very much for suggestions. Currently I am learning about markets as much as I can. My goal is to generate wealth by investing for long-term. As far as I read and understood SGB gives 2.5% returns per anum for 8 years. How are they better than others ? correct me if am wrong.
SGB’s don’t invest a single penny in actual physical gold but give us the exact returns of gold. Confusing? Read-on
Government needs a lot of capital and issue bonds time and again to raise capital through debt preferentially at a low interest rate.
India is the biggest consumer of Gold and almost all of that Gold is imported, which is detrimental for Rupee’s value in the Forex.
SGB or Sovereign Gold Bonds tie in both of these agendas together beautifully.
This is how it works, Govt. issues an SGB and you buy for eg. say Rs.100,000/- Now Govt takes this 1L and uses it for its needs, whatever it maybe.
What you get is a fixed 2.5% p.a interest on this 1L along with whatever gains Gold has made in the time period.
For e.g You invested 1L in an SGB when a gram of gold is Rs.5000. After 8 years say a gram of gold becomes Rs.8000, so your returns would be Rs.160,000/- + 2.5% interest each year. Only risk here is Gold gains over the time period, which is true for any form of gold not just SGB.
SGB’s are one of the clever products, it kills two birds with one stone.
And no Capital Gain Tax. Sweet
Sounds too good to be true huh, Now where’s the catch?
Each tranche of Bond issue is for a term of 8 years and you must stay locked in for atleast 5 Years. So, basically it all comes down to your own personal finance and liquidity needs. Cheers
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Also, check out this thread -
This is one common misconception. SGBs can be traded after 15 days of issue like any other bonds. So you aren’t really locked-in in the truest sense.
The 5 years thing is that you are eligible to redeem after 5 years on every interest paying date.
Though you can trade, if you see the numbers, because of liquidity issue you trade with an average 10-15% discount than market price. There too if you could find a buyer. Please keep it in mind this risk factor with SGB.
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I understand that. Liquidity thing will take care of itself in times to come as more and more people understand the product but I see the 5 years lock-in statement being overused throughout the forum. Hence I wanted to set that right.
wowww… so beautifully put, read this 2-3 times to understand every bit… thanks for explaining…
You’ve basically entered at the peak of the bull run after seeing all the euphoria around gold and now want to abandon ship at the first draw down.
Exactly! following few blogs and websites, thought that gold may hit 6,500 by diwali and invested.
I believe you have invested in one of the ‘digital gold’ products offered in apps like Paytm, Kuvera, PhonePe etc
Exactly! I invested through kuvera
These ‘digital golds’ are not regulated by RBI or SEBI and hence the liability is totally on the mercy of the entity providing them
Ohhh!! not aware of this. I have gone through this post in kuvera and bought blindly
These attract 3% GST every time you buy, so there goes 3% for nothing.
yeah true! and there’s a difference of 2% in buy and sell price
move the funds to a Direct Gold Mutual Fund or an ETF and invest periodically a small sum
hmm… okay, you mean redeem it and invest in MFs and ETFs ? a point noted in kuvera blog post i referenced above is that MFs and ETFs under perform compared to gold prices. They have taken a period and compared. Do you suggest hold it for few more years ? I want to wait till ‘akshaya tritiya 2021’ where the demand for gold may increase hence the price and sell some portion. Currently, I am learning about stocks, so my idea is to invest in them.
@ankurj - what do you suggest with my current investment ? should I stay for couple more years ? or whenever I reach close to breakeven, sell it and put it in stocks ?
Aha. The classic ‘Absolute Returns’ comparison, and that too with Gold market prices rather than eGold. In CAGR terms the difference would be hardly 1-2% when you weigh in Buy/Sell Spread & GST and the absolute backing of SEBI & RBI gives a great peace of mind. One can only value safety when the stakes are large enough.
With all due respect, what are you even talking about. You have to do risk assessment on the basis of your finances and not macro economic factors. This is a trader mindset. Extremely dangerous for any LT investor.
You are a beginner and learning fast. Better than 1000 ‘investors’ out there. No one will ever tell you where to put your money, if so they are doing it for their own gains. When i was a beginner a wise guy said this - To learn, you have to read. To learn faster you have to read & do. Keep some money aside, which you are okay to lose. Could be 1k or 10k, invest that periodically in a Nifty ETF. Do it for 2 years. Investments can wait. And always remember Return of Investment > Return on Investment
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Sorry to dig up this grave. I’m not active here.
I’m also looking to invest into SGB but not clear on how the Govt is really giving back the profit. Where does that profit money difference is coming from? Since the Govt is not putting the money into actual physical Gold or any other Gold related investments.
As in above eg as mentioned, 5K per gram of total 1L invested later when becomes as 8K per gram and sold as 1.6L+2.5% interest as profit. Where does this profit money (60K+2.5% interest) comes from the Govt?
Does the Govt invests in some Bonds or other investments? Or is just takes the money who are investing into SGB that year and gives as profit. Isn’t it like the Ponzi scheme, which essentially is “… that pays existing investors with funds collected from new investors…”?
What if all the investors of SGBs redeems? (not in practical since there’s a 8yr lockin but just assuming), From where does the Govt brings the profit difference?
Just trying to understand how this money flows. Any clarification would be greatly appreciated. Thanks in advance.