The popular 7.75 % savings bonds, which were also known as GOI bonds or RBI bonds were withdrawn for subscription last month w.e.f 29 May 2020.
Come 1st July, the bonds are being re introduced in an entirely new avatar and will be called Floating Rate Savings Bonds 2020 (taxable).
Here are some of its main features –
- Any Indian resident can invest as an individual or as joint/either or survivor /minor with guardian. HUFs can invest too.
- These bonds will be issued only in electronic form and held in an account called the bond ledger account ( BLA) for the investor.
- These bonds are not transferable, except transfer to nominee or legal heir in the event of death of the investor.
- The coupon rate will be floating and pegged at the National Savings Certificate (NSC) rate + 0.35 %. It will be revised every 6 months on Jan 1 and July 1
- Coupon rate for the first subscription opening on July 1 2020 will be 7.15 % ( 6.80% + 0.35%)
- One can subscribe to these bonds through cheques/drafts/electronic mode and cash (only upto Rs 20,000)
The ongoing issue of sovereign gold bonds open from 8 June 2020 to 12 June 2020 has brokers and agents outdoing each other by glorifying its benefits to the potential investors. Since there is enough and more being written how it is a not-to-be missed investment opportunity, this post is not about the “pros” of the issue but about the “cons” which no one seems to be discussing.
- The interest of 2.5% per annum is fully taxable.
- This is a simple rate of interest, does not compound.
- In case someone redeems this before maturity, it attracts capital gains tax.
- Though the bonds are tradable on NSE and BSE, the liquidity and pricing depends solely on the demand at that time.
- The actual gain depends on where the price of gold is at the time of maturity of the issue.
The objective of this post is just to highlight the few drawbacks of this scheme which one should be aware of along with the unique benefits it offers which make it a good investment option. Please consult your financial planner/advisor to understand its suitability and the ideal allocation in line with your financial goals.
Disclaimer: The views and opinions expressed here are solely those of the writer and do not constitute any financial advice in any way nor suggest or promote investments in any products.
The global pandemic has resulted in a secular stock market downturn since February. In just over a month starting from the 3rd week of February, the Nifty corrected by over 35 %. Though it has recovered slightly from that low, it is at a 25 % discount to its price before the start of this meltdown.
As a result we have been getting many inquiries from clients, investors, friends, acquaintances wanting to take advantage of this. The most common queries being asked are:
- I want to invest in quality stocks now at these cheaper valuations. How do I ensure that I invest in companies with strong fundamentals and good credentials, which are likely to bounce back once we tide over this covid crisis?
- I am stuck with an existing portfolio of shares/equity funds which are at a significant loss now, and I do not have any spare funds to invest. Should I book at loss to prevent any further damage, or wait patiently for things to get back to normal?
- I have never invested in equity earlier. But from all the news reports and advice from my experienced friends, I feel it is the right time to start. What is the best way to go about it?
We are financial planners, and our main objective is to protect investor wealth over the long term and ensure that it generates superior risk adjusted returns so as to meet all the financial goals. We are neither fund managers, nor equity analysts or stock market experts.
However, equity investments form an integral part of our recommendations and we have listed below what services we offer in this space.
- For those investors wanting to get into direct equity, we have researched, identified and shortlisted a couple of equity advisory companies which have a good track record and have been consistently beating the benchmark indices. Most of these start with an initial investment of 5-10 lakhs. These advisory outfits have portfolios with specific themes which the investor can take exposure to depending on their preference. They are given a login access to the equity portfolio which they can check anytime to see where the fund manager is investing or what is being bought and sold.
- For the DIY investors who are savvy and have been managing their own share portfolios for a long time, and only want recommendations or names of select stocks to invest in with the rationale and reasoning behind it, there are organizations which we can suggest which do this for a fee.
- For those who have an existing portfolio of shares which they haven’t been able to track properly or do not know what to do next, please send it to us, we can analyse those based on certain standard basic parameters which lie within our purview and area of knowledge and expertise, and give you our feedback.
- For the new entrants, we suggest that they avoid getting into direct equities right away; and start with investing small amounts regularly into diversified equity funds with a proven track record of consistency in returns. We can help you construct a customized portfolio of equity funds, which we will help you invest, and manage and track it too.
Gold has always been perceived as a safe haven to invest in during times of global crisis. So it is not surprising that in the current times of the covid pandemic and fears of a long drawn global recession gold prices have been on an uptrend and in spite of gold currently being at an all time high of around 4600 per gram, the demand has still not reduced. Those who have already invested in gold may exit other asset classes like equity, debt etc, but most of them hold on to their gold assets, as they are considered to be always a “valuable” investment for the long term.
What are the various ways in which you can invest in gold?
- Physical Gold – bars, coins, Gold investment schemes run by jewelry shops etc
- Gold Exchange traded funds
- Gold funds by Mutual fund companies
- Funds which invest in Gold mining companies – These assumes higher risk, and is a slightly indirect way of taking exposure to gold, but has potential to generate high returns.
- Sovereign gold Bonds – These open for a short window regularly from time to time.
While most of them track the price of gold, it is imperative to understand how they work – how to invest, what is the minimum amount required for investing, the ideal time horizon, the exit and withdrawal rules, charges and the applicable taxes. While all this information can be obtained from the internet through some research, what is the most important is to understand which of these is the most suitable for you.
We financial planners sit with our investors and clients, and apart from giving them in depth details of each of the above investment options, we also arrive at which one is the best suited for their personal profile, what should be the percentage to be allocated, depending on how much exposure they already have to this asset class, and aligning this investment to their financial goals.
This is something which one cannot find on google or you tube!
Irrespective of how the economy is doing or where the prices of gold currently are, we have always advised that gold should always be part of any investment portfolio because it a unique asset class which is uncorrelated / negatively correlated to other common ones like equity and debt.