Can you do an SIP in SGBs?

Like with mutual funds, is it possible to do an SIP in Sovereign Gold Bonds (SGBs)? - Anonymous

While you cannot do an SIP in Sovereign Gold Bonds (SGBs), you can buy them on the stock exchange.

If the above sentence is a head-scratcher, let us explain how you can buy SGBs.

1. At the time of the launch

The government launches SGBs in tranches for a limited period. This is when investors can subscribe to them.

For instance, the government issued SGBs in four tranches in the last financial year. These were the four instances when investors had the option to load up on paper gold.

2. On the stock exchange

As mentioned in the first line of our answer, SGBs can be bought and sold on the stock exchange.

So, if you want to buy SGB every month like an SIP, the stock exchange is the place for you.

You enjoy the same SGB benefits if you buy them on the stock exchange: a) You receive an additional stream of guaranteed annual interest of 2.5 per cent, and b) the capital gains (profit) are tax-free if the paper gold is held until maturity.

However, there are a couple of points to bear in mind while buying SGBs on the stock exchange:

• Lack of liquidity: Usually, SGBs lack liquidity in secondary markets. So, buying them on a certain date every month can be a little difficult. Put simply, while you are willing to purchase SGBs, there may not be enough sellers on the stock exchange.
  
• Discount/Premium: SGBs can be available on the stock exchange at a discount (less than the actual value) or at a premium (more than the actual value). That said, SGBs are generally available at a discount due to less demand.

Have more queries regarding investing in SGBs through the secondary market? Read this article.

Also read: SGB: To subscribe or buy in the secondary market?