Sovereign Gold Bonds issue 5th tranche opens today

The Union government announced its decision to issue the fifth tranche of Sovereign Gold Bonds (SGB) in consultation with the Reserve Bank of India (RBI). Applications for the bonds are being accepted from 1 September 2016 to 9 September 2016. The fifth tranche is priced at Rs3,150 per gram of gold. The rate has been fixed by the RBI on the basis of simple average of closing price for gold of 999 purity of the previous week (August 22-26, 2016) published by the India Bullion and Jewellers Association Ltd (IBJA). The current price is slightly higher than the earlier tranche. The RBI had fixed the issue price of sovereign gold bonds at Rs3,119 per gram for the fourth tranche of subscription (from 18 July to 22 July 2016).

The bonds will be issued on 23 September 2016. The bonds will be sold through banks, Stock Holding Corporation of India Limited (SHCIL), designated post offices and recognised stock exchanges - National Stock Exchange of India Limited and Bombay Stock Exchange.

To make the scheme attractive, capital gains tax arising on redemption at time of maturity of the SGB to an individual has been exempted. Long term capital gains tax is applicable if gold bonds are sold after three years. The minimum investment has been reduced from 2gm to 1gm; the maximum remains at 500gm.  The bonds offer 2.75%pa (per annum) interest. The interest is still kept taxable.

The recent jump in gold prices due to global factors has helped the trading of SGB on the exchanges. Investors in the first tranche, issued in November 2015 at Rs2,682, are seeing a premium of 25% in its prices. The trading volume is also increasing which is an encouraging sign. It can help to generate interest in SGB tranches in future.

The scheme does not provide for getting physical gold on maturity, and you can get the equivalent amount only in rupees. SGB is touted as the best option to take exposure to gold, but in reality the buyer of the bond may gain if the price of gold is higher or may lose if the gold price is lower than the price paid by the investor.  And nobody can predict with any certainty what will be the price of gold at the end of five or eight years from now. It is nothing but a speculative investment with a small interest benefit thrown in.



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Changes in Our Business Model
25th Sept 2020
Greetings from Moneylife Advisory Services
Between financial years 2019-21, SEBI has come up with extensive changes to investor advisor regulations. On Sep 23, 2020, SEBI had issued new additional guidelines. This comes just two months after extensive changes announced in July 2020. Earlier, in December 2019 there was an ad hoc circular
As a result of these changes, IAs, cannot accept fees through credit cards, will have to sign a 26-clause investor agreement, have to maintain physical record written & signed by client, telephone recording, emails, SMS messages and any other legally verifiable record for five years. IAs were already asked to record the suitability and rationale for every piece of advice given, sign them and store them for five years.
While these extensive and frequent changes, designed to strengthen the conduct of IAs are well-meaning, these have sharply increased compliance efforts and cost. We, being online advisors, find many of changes harder to implement, compared to advisors working in the physical space. We will have to have an army of advisors, administrative and tech staff to be compliant. If we do this, we will have to divert money to these areas and the cost of our service will double. We want to remain the least-cost service in the market to benefit more and more people. In the circumstances, we are forced to change our business model from “advisory” to “research”. This will mean the following:
What remains the same:
  • Recommendations on insurance, investment and Lion stocks, will continue as a part of the MAS premium subscription. Our strength has always been research and this will remain available to you through our recommendations.
  • The magazine and all textual content will remain as part of the service
  • We will have to suspend the restructuring tool.
What changes:
  • The interactions in Ask / Handholding will offer investment advice but not specific to your situation. It will offer information on investment products and also clarify your doubts about various financial products. It will be a forum for information, not for advice. This will be implemented with immediate effect and our guidelines in Ask, reflect this now.
Over the next few weeks our site and our communication to you will reflect these and other additional changes.
We feel this will not affect you much in terms of what really matters in investing: knowing what to buy and when to buy. This is our edge and it will still be available to you.
Debashis Basu