Sovereign gold bonds and fixed deposits, both are attractive investment options that involve less risk. Fixed deposits are the safest option of investment for a long time, whereas sovereign gold bonds are drawing more and more attention due to the Gold monetization scheme.
Both investment options come with their benefits and drawbacks. In this article, we are going to discuss the difference between sovereign gold bonds and fixed deposits.
Fixed deposits
Before diving into the difference between Fixed deposits and sovereign gold bonds, let us take a look at both investment options independently.
- Investors can deposit the lump sum amount for a fixed duration of time with the bank.
- The deposited sum earns the interest at the specific rate over the predetermined tenor. This interest rate tends to be higher than the regular savings account.
- The interest rate is compounded on an annual or semi-annual basis. It is based upon the time of tenor and depositing.
- On the completion of the tenor process, investors can select to withdraw or re-invest the total amount.
- The maturity proceeds can be re-invested entirely for more appreciation.
- The FD can be redeemed or broken before the maturity date, but this consists of the penalty charges.
Pros of the fixed deposits
- Assured interest rate
The invested amount earns the fixed interest throughout the tenor.
- Accessibility
FD is the kind of financial instrument that is easily accessible to all income groups. Here the minimum deposit amount stands at an affordable price.
- Security and stability
FD has become known for its stability and security in investments.
Sovereign Gold bonds
SGB ( Sovereign Gold Bonds) is the kind of financial instrument issued by the bank. Here is how it works
- It allows the investors to hold the gold investments without taking any physical assets. In this way, it is considered a secure option than keeping or buying real gold.
- It involves less risk because the gold prices in it are less fluctuate
- SGB ( sovereign gold bonds) are easily traded in the secondary markets
- The prices of SGB are risen considerably over time, following the gold demand and its popularity trends in the markets
- Investors can able to exist after the 5-year mark, but the period of maturity is the eight years
Pros of the sovereign gold bonds
Assured interest
SGB has come with a guaranteed interest rate of 2.5%, which exists on a semi-annual basis. This rate remains constant for the entire tenor for 8 years.
Accessibility
Trusts, HUF, individuals, universities, and charitable institutions are eligible to purchase the SGB.
Affordability
Since the minimum investment begins at the grams, SGB is considered the affordable investment option. This made the gold easily accessible to everyone.
Pros of the fixed deposits
- Assured interest rate
The invested amount earns the fixed interest throughout the tenor.
- Accessibility
FD is the kind of financial instrument that is easily accessible to all income groups. Here the minimum deposit amount stands at an affordable price.
- Security and stability
FD has become known for its stability and security in investments.
Conclusion
This article delivers information on fixed deposits and SGBs. Your decision between the FD and SGB is based on financial goals and risk tolerance.
