Upto 12% Returns in Gold Investment – Sovereign Gold Bonds in 2024? | AssetYogi Show #8

Are Sovereign Gold Bonds the best Gold Investment? Discover the 6 Ways of Gold Investment like Gold Jewellery, Gold Bullion, Gold ETFs, Digital Gold, Gold Mutual Funds, and Sovereign Gold Bonds (SGBs).

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Which gold investment gives maximum tax benefits? In this video, we’ll compare all gold investment options and find the best Gold Investment option.

0:00 Intro
01:00 Why invest in Gold?
02:10 How much investment in gold?
02:22 Types of gold investment
04:32 Gold Jewellery
08:24 Gold Bullion
10:22 Digital Gold
13:00 Gold ETF
15:28 Gold Mutual Fund
16:37 SGBs
19:43 Conclusion

About the Video
Indians have loved gold for centuries. Gold is considered as the safest investment option in the times of volatility and uncertainty in the global markets.
Begin the journey of gold investment, mastering Gold Investments as a beginner. This comprehensive session covers aspects, from gold jewellery to navigating modern options like digital gold, gold bullion, gold ETFs, gold mutual funds, and Sovereign Gold Bonds (SGB) – all to help you discover the best gold investment strategies.
Dive deep into Sovereign Gold Bonds (SGBs) and unravel the of investing in gold through SGBs. Stay informed about key SGB dates, learn how to buy SGB, and stay updated on the latest interest rates.
Wondering which gold investment gives maximum tax benefits? Gain valuable insights on “Gold mein invest kaise kare” (How to invest in gold) and explore effective strategies to earn interest through gold investments.
We offer a guide to gold investment in India, catering to all levels of expertise. Unlock the secrets of digital gold investment and understand its role in today’s dynamic market.
Learn as we delve into the significance of gold investment returns and gain high-interest returns on gold investment which can contribute to your overall portfolio.
In this video, we’ll cover the following concepts:
1. Why Invest in Gold?
2. How much to invest in Gold?
3. Different Methods of Gold Investments.
4. Best Gold Investment for the Long-term?
5. Benefits of Gold Investments.
6. Which gold investment gives maximum tax benefits?
7. Tax-free forms of Gold Investments.
8. What is Digital Gold, Gold ETF, and Gold Mutual Funds?
9. Difference between Gold ETF and SGBs.
10. What are Sovereign Gold Bonds (SGBs)?
11. Gold investing for beginners
12. Gold Investment as an Emergency Fund.
13. Gold Mutual Fund vs Gold ETF
14. SGBs vs Physical Gold
15. Physical Gold vs Digital Gold

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Investing in gold is an old habit of us Indians. In the financial year 2023, 78% of the gold we bought was in the form of jewellery, which is more than a global average of 45%. But if we look at gold as an investment, is investing in jewellery or physical gold the best option?

In this video, we will know 6 ways to invest in gold and we will compare the returns of each option. And we will see how we can get annual returns of 12% from gold. Namaskar, I am Mukul Malik and you are watching The Asset Yogi Show.

Before starting the video, let me tell you that our app is coming. My team and I believe that investing through this app will become very simple. You can sign up for the app for discounts and early access. You will find the link in the description below.

And while subscribing to this channel, press the bell icon and click on ‘ALL’ to get the latest video notifications. Let’s go straight to the topic. Let’s talk about why we should invest in gold. The first reason is diversification.

Whenever we make an investment portfolio, even if we are investing in stocks only, it is not that we invest in one stock only. Similarly, when we make an overall investment portfolio, it is not that we invest only in one type of investment.

And we do this diversification because if there is a problem in any type of investment or any type of losses, because of short term volatility in the market, then other investments perform better and overall returns are better. The second reason is that gold is a huge hedge.

Whenever there is a lot of volatility in the stock market, that is, if the stock market is going down, then historically we have found that gold is performing better at that time. If we look at the volatility of gold over the last 30-40 years, it is much less than the stock market.

So this means that whenever our crisis comes, like our financial crisis of 2008, the crisis of Covid-19, when there was a war between Russia and Ukraine, whenever our stock market went down, gold performed very well. So hedging becomes a big reason. Now the question arises that if we want to hedge,

If we want to diversify, then how much should we invest in gold? See, as a thumb rule, we can keep 5-10% of our overall investment portfolio in gold. Now let’s compare different types of gold investments. If we invest in any gold form in November 2015 and exit in November 2023,

We have assumed a holding period of 8 years. Generally sovereign gold bonds come for an 8-year period, so we have assumed a holding period of 8 years. And along with that, we get decent returns in the long term, so the holding period assumption is almost correct.

So the assumptions we have taken here are gold rates. If we invest in physical gold in 24 carat, in 1 gram, then its assumption was that in November 2015, its rate was Rs. 2684 per gram. We have taken the assumption of 24 carat for apple to apple comparison.

Now the buying rate of digital gold, here you have to understand that it is slightly more than your physical gold rate. On an average, it is 1.5% more. So all the digital gold companies like MMTP PAMP, SAFE Gold or Augmont Gold,

They keep their buying price a little higher and their selling price a little less. And this is called buy-sell-spread. So they mainly earn from this buy-sell-spread. So many times you will feel that I am not paying any charges while buying digital gold. Actually those charges are inbuilt in your buying and selling price.

Now if we talk about sovereign gold bonds, then our assumption is that the last 3 days gold price is taken. So whenever RBI comes with its new tranche, it takes the gold price of the last 3 days. So here the average price was Rs. 2634.

We have considered the holding period as 8 years. Now if we had sold it in November 2023, then the rate of gold was Rs.6132. Then the selling rate of digital gold was 1.5% less than this selling rate. So the selling rate of Rs.6040 was here. The redemption rate of SGB was only Rs.6132.

That is, the rate of gold was the same as the rate of SGB. Now here we see different types of investment charges and how we get returns. If we had bought jewellery in 2015, then we have assumed that if we had invested in 100 grams, then our acquisition cost would have been Rs.268,400.

On top of this, our making charges would have been 15% on an average. If I talk to you about making charges, then it costs from 8% to 30%? I have taken an average of 15% charges. So these are our making charges of Rs.40,000. These making charges actually make jewellery a bad investment

We will see in the returns. Then our investment and making charges are charged with GST of 3%. So I have assumed that here. The total acquisition cost is Rs.3,17,000. Then what charges were charged during accrual? i.e.when our investment was accumulating, what charges were charged during that time?

During that time, locker charges will be charged. See, no one keeps gold at home. If it is kept at home, then there will be safety issues. So generally people keep it in the bank lockers. Here I have assumed very simply that we have to pay only Rs.3,000 this year.

And in fact, if we talk about the locker charges, then it can be up to Rs.9,000-10,000 a year. Depending on which bank you are opening it with, or what size locker you are taking. So here I have taken very few charges of Rs.3,000 this year. So for 8 years, Rs.24,000.

Then the expense ratio or the other expenses, no such expenses are found in our gold case, in physical gold. So charges of Rs. 24,000 were charged during accrual. On maturity, whenever you go to sell jewellery, then any jeweller will make some kind of wastage out of it.

On an average, 8% of wastage charges are charged. So we will have to minus it here. For maturity value, we had already assumed that our price was Rs. 6132. If we multiply it by 100, then our maturity value of Rs.6,13,000 is made of that gold. Then obviously no interest is there

Then if we see our final corpus here, then from our maturity value, we have taken out these wastage charges. We have taken out these locker charges. And we have to add interest cost in it. There is no interest cost in this case. So our final corpus is Rs.5,67,000.

Now see, some taxes will also be charged here. So how do our taxes get charged here? Here we get the benefit of the indexation value. So how do we get the capital gains tax here? If we have invested more than 36 months, then our long-term capital gains tax is charged.

That is 20% and 4% of Cess is charged. So we have to pay a tax of 20.8% here. But we don’t have to pay this tax on the final investment value. From that we have to minus the indexation value. So from our final corpus, we have to take out the indexation value.

This indexation value is assumed to be our acquisition cost, i.e.the acquisition cost of Rs.3,17,000. There will be some normal inflation on it. So we have to minus the actual index value. And to take out the indexation value, you can easily get the indexes. You can search online.

So the indexation value that I have taken out, it has come close to Rs.4,60,000. So out of Rs. 5,67,000, if we minus this 4,60,000, then the amount that will come, we will get a tax of 20.8%. This tax is Rs.22,000. So now our after-tax final corpus has come out is 5,45,000.

I.e.the final amount that we will get by selling our jewellery will be Rs.5,45,000. If we look at it in the form of returns, then our post -tax returns have come out of about 7%. So these are our physical gold annual returns of 8 years on average Now let’s talk about the gold bullion.

I.e.if we do not invest in jewellery, if we invest in gold coins, if we invest in gold bars, then what kind of returns do we get? So here we have taken the same investment as we had in jewellery. Then here the making charges are a little less.

In jewellery, we have to pay for the design. That design does not cost that much. But we still have to pay for the making charges. On an average, it becomes 8%. So these are our making charges. And then on both these charges, i.e. on the investment amount and on our making charges,

Total 3% GST was taken. So the total acquisition cost came out to be Rs. 2,98,000. We will have to pay the locker charges here too. Because now we do not want to keep gold at home. Otherwise, there will be an issue of safety.

So there is a big issue of safety in physical gold. Then the expense ratio, expenses, these charges will not be charged. So our accrual charges are a total of Rs.24,000. Then I have not assumed any wastage charges here. Because when we take gold as a bar to a jeweller,

Wherever we want to sell it, then our wastage does not cut there. Then the maturity value that came out here was Rs.6,13,000. As we have seen in the case of jewellery. We are not getting any interest here too. So our final corpus came out to be Rs.5,89,200.

Now the tax will also be charged in the same way. The indexation value came out to be Rs.4,32,000. Our tax is Rs.32,000. Our final corpus after tax is of Rs.5,56,000. If we see it in the form of returns, then see here that our returns are better. They are of 8.1%.

So what was the main reason here? The main reason was that our making charges are less than that of jewellery. So whenever we buy jewellery, if we take it as a consumption, if we want to wear it, if we want to use it, then that is fine.

But if we consider jewellery as an investment, then it is not a good investment. More than 1% of our returns have been affected directly because of the making charges. Now let’s talk about digital gold. First let’s understand what is digital gold? When we are buying physical gold,

We are keeping the gold in our house or in our bank. We are keeping the gold possession with us. But if we invest with a company that buys all the gold and keeps it in its vaults, and it tells us that your investment is with me,

For that, it issues you a paper or a certificate. And as your growth of gold will continue, you can either take that gold later for physical delivery, or you can sell it back to that company. So their buying rate and selling rate is also gold. And the buying rate and selling rate,

The spread of it is where the profit of these companies lies, So here the amount of our investment of 100 grams, you remember that we had already factored in this assumption, that we had taken the rates of gold here.

The buying rate of digital gold is 1.5% more than the actual rate of gold. And similarly, the selling rate of digital gold is 1.5% less than the actual rate of gold. So according to these assumptions, our investment amount was 2.72 lakhs. In the case of our gold bullion, it was 2.68 lakhs.

See here, our investment amount has already increased. GST will also be applied to this, of about 3%. Then what will be the remaining charges? Now see, there is no other charge here. We have to pay no locker charges, there is no expense ratio, There are no wastage charges here.

Of course, we are not getting any interest here. So our maturity value has become 6.4 lakh And this came according to our selling price. So here our indexation value will be calculated. And here as it is our tax will be applied. And here we are calculating long term capital gains tax.

Let me tell you one more thing. If we sell all these forms of gold within 3 years, whether it is digital gold or physical gold, then our short term capital gains tax will be applied. That is, whatever profit we have, whatever capital gains we have, they are added to our salary.

And whatever tax rate we have in our salary, If it is 10% then 10% tax will be applied And if we come in the 30% bracket, then our 30% tax will be applied. In fact, in the highest income tax bracket, even a 40% tax can be applied.

So it will depend on your salary’s income tax bracket. So in this case, the taxes of 41,000 were made. So our final corpus, after tax, was of 5.62 lakhs. And here the tax returns were made of 9%. That is, 1% more than our bullion.

And here you can see our 7%, 8% and 9%. We are getting a jump of 1% here. Now let’s see the fourth type of investment. Which is Gold ETF. Gold ETF means Gold Exchange Traded Fund. Here we invest in a fund. And this ETF invests that money in gold.

That is, it stores physical gold. So this fund is backed by real gold. Then here our investment is also in actual gold. We took the rate of 24 carats. So our investment is of the same 2.68 lakhs. Now here we are not getting any GST or making charges.

Then what will be the charges here? Now there will be some charges to manage that fund. That is called the expense ratio. You will generally see that from 0.3% to 0.5% our charges can be there. In some cases it can be 0.2% or 0.25%.

Apart from this, some of our brokerage charges can be there. Our security transaction tax can be there. SEBI charges can be there. Because our ETFs are basically traded in the stock market. So whenever we transact in them, then we get different types of charges.

So we have assumed that all these charges are 0.55%. Then the expenses that have come out of 0.55% have become about 11,800. So during the accrual time, i.e.till the time we are invested in the fund for 8 years, these charges will be there every year. So I have taken these 8-year charges here.

Here our wasted charges will not take anything. Now our maturity value will come out of 6,13,000 rupees. Tax will also be there according to our indexation value. So this long-term capital gains tax will be 20%. Now let me give you one more clarity. After 1st April 2023,

All the ETFs that are being invested will not have the benefit of long-term capital gains tax in investing in ETFs. All our profits will be added to our salary. So there, like short-term capital gains tax, all capital gains will be treated in the same way to invest in ETFs. So we assumed that

We invested in November 2015. So at that time, obviously this short -term capital gains concept was not there. So here is our long -term capital gains tax will be imposed. And here our final corpus will be 5.58 lakhs. Post-tax returns have become even better, of 9.6%. i.e.compared to digital gold,

We are getting half percent returns even better. Now let’s talk about Gold Mutual Fund. What is this Gold Mutual Fund? Gold Mutual Fund is a fund of funds. i.e.it invests in different ETFs. So there also we have to pay some extra charges. So what are those charges? The ETF is already charging,

But along with it, the mutual fund will also charge itself. So here we have assumed a total of 1% of charges. So according to this, our 21,000 charges took place in 8 years. Our maturity value is the same as the ETF of 6,13,000. So our final corpus is 5.91 lakhs.

Obviously here also our taxes will be imposed. Long-term capital gains tax will be imposed, which I have assumed of 20%. And here also we will get the benefit of our indexation value. Our final corpus will be of 5.51 lakhs. And here our post-tax returns are of 9.41%.

Now see this is a little less than the ETF. Because now the fund manager of the mutual fund is also charging something. It is also charging 0.2% or 0.25% every year. Because of that, the returns have decreased a little compared to the ETF. Now let’s talk about our final product,

Which is Sovereign Gold Bond. This is also a very interesting product. First you understand this product. Here no one is investing in any type of actual gold or physical gold. So here investment is done according to the value of gold. That is, whenever you are investing,

The rate of 24-carat gold for the last 3 days our investment is done according to that. Similarly, when we redeem it, that is, whatever gold value is after 8 years, we get the money back according to that. There is no investment in physical gold here. So it is basically a paper product only.

But here still there is RBI backing. That is, we can say that these are risk-free returns. So the investment we made in Sovereign Gold Bond is of Rs. 2,63,000. Making charges do not cost anything here. GST also does not cost anything. So this is also an advantage here.

We do not have to pay 3% as well. Locker charge does not cost anything. Expense ratio, that is, no money is being spent to manage any fund here. So our expenses are also 0. Wasted charges again 0. Our maturity value is of Rs.6,13,200. Interest is also available here. There is another big advantage.

We get a simple interest of 2.5% every year So we are getting additional returns. So our final corpus here is of Rs. 6.65 lakhs. Now see how much taxes are being imposed here. There is no need for indexation value here. No capital gains tax is imposed here.

The taxes imposed here are not imposed on the investment value that our investment grew. But the interest that we got of 2.5% of Rs. 52,000 will be taxed on it. And this tax will be imposed as per our income tax slab rate. So I have assumed that if the rate is 20%

Then our tax of Rs.10,000 will be imposed here. So our final corpus here is of Rs. 6.55 lakhs. You can compare it in the whole investment. The biggest corpus is being made in the case of Sovereign Gold Bond. If we talk about post-tax returns, then we are getting directly 12% returns.

If we compare it with all the gold investments, then we are getting a lot of returns. So if we want to invest in gold, then Sovereign Gold Bond, if we talk about investment, is the best product that comes out. In which returns are also the highest and the government’s backing is also there.

But here I will give you one more thing of clarity. In Sovereign Gold Bond, capital gains tax is not imposed when we redeem it after 8 years That is, when it is fully matured. If we sell it in the middle, then our capital gains tax is imposed.

That is, if we sell it after 12 months, then our long-term capital gains tax is imposed. If we sell it before 12 months, then our short-term capital gains tax is imposed. But still, if we want to sell this fund in an emergency, then we can definitely sell it.

Even if we have to pay tax, we have to pay it in other gold investments too. But we can easily sell it too. Because it is registered through DEMAT account. You can also buy and sell it online. That is, we can buy and sell it in the secondary market too.

So I would say that if you are thinking of investing in gold, then definitely consider Sovereign Gold Bonds. Now you can ask your questions related to this topic in the comment section below. We will try to cover them in YouTube Shorts and Instagram Reels.