Top Gold ETF vs top SGB Bond: Which has given higher return on Rs 5 lakh investment; get calculations
Top Gold ETF vs Top SGB Bond: Gold ETFs have gold as the underlying asset. To understand how gold ETFs work- 0.5 gramme of 24 carat gold comprises 1 unit of gold ETF and can be traded at the ongoing market price of gold (in its physical forms). SGBs are government securities, substitutes for holding physical gold, denominated in grammes of gold.
Top Gold ETF vs Top SGB Bond: What is Gold ETF? Equity mutual funds invest most of their money in stocks. But there is a difference between how you can invest in a mutual fund scheme and stock. Stock can be traded anytime during market hours, where you can purchase the same stock at different prices. In mutual funds, the net asset value (NAV) rate is determined after market hours, and it remains the same till the market closes the next day. But there is a category in mutual funds that defies this norm. The category is known as exchange traded fund (ETF). ETFs can be traded like stocks as their prices keep changing throughout the trading session. ETFs follow indices and have a low expense ratio. Each ETF has an underlying asset, where it invests most of its funds. Gold ETFs have gold as the underlying asset. To understand how gold ETFs work- 0.5 gramme of 24 carat gold comprises 1 unit of gold ETF and can be traded at the ongoing market price of gold (in its physical forms). So, while it has nearly the same value as the physical gold, it doesn't involve any making charges or any other premium that adds to the price of physical gold.
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What are Sovereign Gold Bonds (SGBs)?
SGBs are issued by the Reserve Bank of India. These are government securities, substitutes for holding physical gold, denominated in grammes of gold. They provide 2.50 per cent annual interest.
What are Sovereign Gold Bonds (SGBs)?
SGBs can be redeemed on a maturity period of 8 years, but the government also allows early redemption of bonds after 5 years from the date of issue on coupon payment dates. The minimum investment in the bond is one gramme with a maximum limit of subscription of 4 kg for individuals, 4 kg for Hindu Undivided Family (HUF), and 20 kg for trusts and similar entities.
What are Sovereign Gold Bonds (SGBs)?
One of the unique features of the SGB is that after 5 years from the date of issuance, SGBs are opened for secondary markets, where they can be traded like stocks.
Best SGB in terms of performance
In terms of the performances of all SGBs available as on August 19, 2024, Sovereign Gold Bond Scheme 2017-18 – Series XIV 2.50% is the top performer with 167.3 per cent absolute returns since its launch on January 1, 2018.
Best SGB in terms of performance
The scheme will mature on January 1, 2026. The issue price of the series was Rs 2,881.00 at launch. It was trading at Rs 7,700 as on August 20, 2024. The coupon rate is 2.50 per cent and the coupon frequency is half yearly for the SGB series.
Best gold ETF since January 1, 2018
Since we are comparing the top gold ETF with the top SGB bond, we are taking January 1, 2018, as the cut-off date. Axis Gold Direct Plan tops the chart from that date with 13.87 per cent annualised returns. It has assets under management (AUM) of Rs 500 crore. The current net asset value of the gold ETF is Rs 23.1975.
Best gold ETF since January 1, 2018
It has given 6.28 per cent annualised return (CAGR) since its launch in January 2013. At an expense ratio of 0.17 per cent, the fund's minimum lump sum and SIP investments are Rs 100. It has 96.18 per cent of its allocation in commodities.
Top gold ETF vs top SGB Bond: Higher returns on Rs 5 lakh lump sum investment
We are taking January 1, 2018 as the starting period of return in both the gold ETF and the SGB bond scheme.
Return on Rs 5 lakh investment in Sovereign Gold Bond Scheme 2017-18 – Series XIV 2.50%
If one had invested Rs 500,000 in the SGB scheme, at 167.27 per cent return, the estimated return till date is Rs 8,36,350, and the estimated maturity amount is Rs 13,36,350.
Return on Rs 5 lakh investment in Axis Gold Direct Plan
From January 1, 2018, the estimated maturity amount on investment of Rs 5 lakh in Axis Gold Direct Plan would have been Rs 11,64,423. It means the top SGB has surged ahead of the top gold ETF in terms of returns.