What are the best alternatives than investing in physical gold?
If it is investing and it is for long term, it has to be SGB or Sovereign Gold Bonds.
No issue open right now, do keep a track here:
why can’t he invest in Gold ETF?
He asked for best, of course Gold ETFs are better than physical gold, but SGBs are better than Gold ETFs (if held for long term) and here is why:
- Gold ETFs have an expense ratio of around 1%, none for SGB.
- Gold ETF’s doesn’t give any guaranteed income like SGB gives 2.5% per annum.
- Capital gain is exempted on SGB. On Gold ETFs, STCG (<3 years) as per IT slab, LTCG at 20% with indexation benefit.
The reason I said if for long term is because there isn’t much liquidity in SGB on the exchanges yet. So SGB isn’t as easy to get out as Gold ETFs.
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But bonds have tenure. They can’t be held indefinitely…like 15-20 years, can they?
Yeah, SGBs have a tenure - 8 years. If you can’t buy SGB with the same deal at the end of the tenure, you could just shift to Gold ETFs. There is nothing you lose by doing it. But for 8 years you would have made a fixed 2.5% every year return.
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thanks, i’ll look into it.
what is the returns on Gold ETF?
depends on the ETF, its generally between 7-10%. My estimate is that the physical gold might go upto 12k per gram within a decade.