Introduction
Hello everyone, and welcome to another blog post! When it comes to investing in gold, there’s no shortage of online content advocating for Sovereign Gold Bonds (SGBs) as the best option. Comparisons often suggest that other methods, like digital gold, physical gold, or gold ETFs, fall short. While these discussions can be helpful, I’ve always felt the need for real data or portfolio performance examples to back these claims.
In this post, I’ll share the performance of two SGB portfolios from my family over the past two years. Goal is to provide real-world data to help anyone looking to make better financial decisions when it comes to gold investments.
Starting the SGB Journey
We began exploring SGBs in 2022. While we liked the concept of SGBs, no one in our known circles had invested in SGB at that point. Even our financial advisor wasn’t very bullish on them. Despite the skepticism, we believed the risk-reward ratio was favorable and started investing.
Portfolio Performances
Portfolio 1: My Father’s Investment
- Start Date: August 2022. Current XIRR: 21.7%
Portfolio 2: My Wife’s Investment
- Start Date: December 2022. Current XIRR: 25%
The amounts invested are different for all for investments, purely based on funds available at the time. That is also the reason why IRRs are different, despite both starting their journey the same year.
Also, These returns are based solely on gold price appreciation and exclude the additional 2.5% annual interest paid semi-annually. If the interest is factored in, the net IRR would be even higher.
Another Case Study
I also did some working on a different scenario. If someone invested in 1 gram of gold in every SGB issuance since May 2021:
- Total Investment: ₹93,000
- Current Value: ₹1,14,000
- IRR: Over 17% (excluding the 2.5% interest)
- Current Gold Price Used: ₹7,800 per gram
Once again, these returns are based solely on gold price appreciation and exclude the additional 2.5% annual interest paid semi-annually. If the interest is factored in, the net IRR would be even higher.
Observations and Learnings
- Gold has performed exceptionally well over the past few years and SGBs have been particularly profitable investment for us as a family.
- That is why we are gradually increasing gold’s share in our investment portfolio.
- But there have been no fresh SGB issues since February 2024. Speculation suggests the government might discontinue SGBs as they haven’t turned out well for Government’s plans.
- With no clarity on future SGB issues, we’ve started exploring other gold investment formats and alternatives.
Share Your Experience
If you also invest in gold, I’d love to hear about your experience.
- What instruments do you prefer for gold investments?
- How has your portfolio performed?
If you have specific questions about my investment journey, feel free to ask in the comments. I’d be happy to help!
Thank you, and have a great day!