Gold Investment: SGB VS ETF: Which is Better for You?
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Gold Investment: SGB VS ETF: Which is Better for You?

gold invesrment SGB-Vs-ETF

Investment is the most effective way of putting your money to work and accumulating wealth. Despite the emergence of new trends and innovations in investments, gold investment still holds an irreplaceable position. The value generated from investing can be utilized to fulfill your financial objectives. Smart investing will increase the real value of your money (increase at a higher rate than current inflation). 

Investing in gold is one of the easiest and most efficient methods of investment. It acts as a solid hedge against inflation and is highly liquid i.e., can be easily redeemed and you can instantly receive cash. Moreover, unlike stock markets and bonds, investing in gold does not require any specialized knowledge. Gold investment allows portfolio diversification and acts as a balancer against market volatility. 

There are two ways of investing in gold – SGB (Sovereign Gold Bond) and Gold ETF (Exchange Traded Funds ). One can purchase SGBs from secondary markets where RBI issues them in periodic tranches. On the other hand, Gold ETFs are passive investment instruments that track the domestic price of gold.

Every individual has different investment objectives and visions e.g. some are looking for long-term investment whereas some are interested in a medium-short term. Both ETFs and SGBs serve different objectives, so investors should compare their objectives with these instruments before making any decision. This blog aims to share tips to find the best investment option between SGBs & ETFs. We will further compare both, their pros and cons.

What Are Sovereign Gold Bonds?

SGBs (Sovereign Gold Bonds) are government securities dominated by the RBI (Reserve Bank of India) which issues these bonds on the central government’s behalf. SGBs have a specific maturity time, before that one can’t sell his/her acquired bonds. You can buy SGBs for investment purposes, it’s a perfect alternative to physical gold. In physical gold, we have storage and security issues, and paying making charges, while SGBs are free for these headaches. 

Additionally, The holder does not get any interest on physical gold but in the case of SGBs, the holder will receive regular interest payments. 

Some benefits of investing money in SGB are as follows: 

  • Low Risk: These bonds are issued by the RBI on behalf of the government in line with Government Security Act 2006. These bonds come with sovereign backing and have zero chances of default making your investment completely secure. As these bonds are aligned with the domestic price of gold, the only risk is fluctuation in market prices. 
  • Convenience: As compared to physical gold, SGBs are quite convenient and safe. Holders of these bonds are provided with an investment certificate which serves as proof of their investment. Unlike physical gold in which investors have to fret about storage and safety issues, there is no such case in SGBs. 
  • Hedge Against Inflation: As gold prices outpace the inflation rate, SGB can serve as a shock absorber against inflationary pressures allowing a real increase in the value of the investment portfolio.

The RBI has set a window within which it issues these bonds and this opens for 5-7 days every 3 months. This is a good investment option for those who are low-risk investors and prefer to invest in gold. 

What Are Gold ETFs?

As already discussed above, gold-based ETFs are passive investment options offering individuals an alternative to investing in physical gold. This index tracks the domestic price of gold and can be traded on stock exchanges i.e., NSE and BSE. Gold ETFs combine dual benefits – flexibility of stock markets and simplicity of gold investments. 

Purchasing Gold ETFs means investors are buying electronic gold and when an investor opts to sell these ETFs, they will not receive bullion but cash equivalent according to the prevailing price of gold. Here are some reasons why Gold ETFs are beneficial: 

  • Flexibility 

One of the major advantages of investing in Gold ETFs is its flexibility. One can purchase these ETFs in Demat form and trade them on stock exchanges within market hours. As ETFs are stored in Demat accounts, it gives investors flexibility of entry and exit. 

  • Small Denomination 

Usually, gold investments are not meant for small investors because of huge investment outlay. However, ETFs do away with this problem as there is no minimum investment criteria. You can invest even Rs. 100 and equivalent ETFs as per prevailing gold prices will be transferred to your account. 

  • Tax Efficiency 

Returns earned from Gold ETFs are subject to only LTCG or long-term capital gains tax. There is no other tax burden like wealth tax, DDT, etc. If an investor is in the higher tax bracket, gold ETFs can be beneficial as these investments will be more tax-efficient than investments in stocks. 

Comparing SGBs and ETFs 

Now that you are well versed in the meaning of both investment options, let’s make a small comparison of of these two investment options as it will help you in making wise investment decisions: 

  • Liquidity 

SGB: In terms of liquidity, SGBs stand lower than ETFs. SGB has a fixed tenure of 8 years with an exit option only at the end of the 5th year. 

ETFs: These are more liquid as ETFs can be sold and bought on stock exchanges within the market hours. You have direct control over entry and exit in the case of ETFs. 

  • Costs 

SGB: These bonds do not come with any kind of management fees or brokerage charges. These bonds may be issued at a discount or premium depending upon the prevailing market conditions. 

ETFs: As these are managed by AMCs, you have to pay both the management costs and brokerage charges.. All these create additional financial burdens burden on investors. 

  • Return

SGB: As these are bonds, apart from the capital appreciation in the value of gold, investors are also eligible to receive fixed interest payments payable half-yearly. 

Gold ETFs: There is no provision for fixed interest returns in ETFs. The only return that investors will receive is from appreciation in the price of gold. 

  • Ease of Investment 

SGB: SGBs have a complicated and rigorous subscription method. Investors need to fill out an application form and submit the same to banks or designated post offices. The redemption process is also through the same channel or by selling them on stock exchanges. 

Gold ETFs: These act just like any other stock investment and can be bought and sold electronically via a Demat account without the need to visit banks or post offices. 

ETFs vs SGBs Which Option is Better for You 

Both SGB and Gold ETFs have their strengths and limitations. Now it is up to your investment objective, vision, and risk appetite which will help you in making a wise choice. If you are looking for a long-term investment and want fixed interest income then SGBs can be a preferred option. However, if you put greater emphasis on liquidity, costs, and a shorter investment timeline, gold ETFs may help in fulfilling your investment objectives. 

Returns SGBs are linked to the price of gold but there is a fixed interest component that you receive annually. ETFs are also linked to the price of gold. However, unlike SGBs there is no interest component in gold ETFs.
Flexibility The tenure of SGBs is 8 years but there is a lock-in period of 5 years meaning you cannot redeem it before the end of 5 years. ETFs are far more flexible compared to SGBs. There is no lock-in period and one can enter and exit as per their requirements.
Taxation If SGBs are held till maturity, all capital gains will be tax-free. However, interest is fully taxable In the case of ETFs, there is no exemption from capital gains tax. You need to pay short-term or long-term capital gains tax based on the duration of holding.
Cost There are no recurring costs in SGBs. In the case of ETFs, you need to pay annual charges like brokerage fees, commission, expense ratio, etc. Can You Utilize SGB For Emergencies?

Sovereign gold bonds suffer from a lack of liquidity as they come in with a lock-in period of 5 years. They can be redeemed or traded on stock exchanges but only after the completion of 5 years from the date of issue. Therefore, SGBs may not help you out during financial emergencies. On the other hand, ETFs can be sold at any time during stock market time. This normally takes 2-3 days to reflect and withdraw the amount in your bank account. Additionally, ETFs can not be sold on weekends, or on the holidays when the exchange market is closed.   

On the other hand, gold loans emerge as a viable alternative to tide over your immediate financial crisis. It offers a way of using physical gold to obtain liquid cash by mortgaging it with the lender. Gold loans can be availed in any emergency or to fulfill any financial need. Most gold loan providers offer quick and hassle-free loans within 30* minutes, even you can apply and get a gold loan at your doorstep.

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Tired of searching for a reliable and secure gold aggregator? Your search ends with Sahibandhu. We are India’s leading gold loan aggregator that will rescue you from all financial troubles by offering gold loans at competitive interest rates and faster processing time. Here are several reasons why you should choose Sahibandhu for gold loans: 

  • Low-Interest Rates: Sahibandhu offers gold loans at a lower interest rate, which makes it a more cost-effective option than other traditional loans.
  • Flexible Repayment Options: We offer flexible repayment options for our borrowers so that they do not have to face any unnecessary financial burden.
  • Multiple banks: You can avail of gold loans from several leading multinational banks like HDFC, ICICI, Axis Bank, etc to meet your financial requirements. 
  • No Credit Score: There is no need for any credit score to avail of loans from Sahibandhu as gold serves as the required collateral. 
  • Zero Paper Work SahiBandhu simplifies the gold loan process with zero paperwork. Simply provide PAN, address proof, and bank details.

You can also avail a gold loan at home with Sahibandhu from the comfort of your home. After raising a request our executive will visit your house to complete formalities and disburse the loan. Additionally, you can also visit the nearest Sahibandhu branch with prior for speedy loan disbursal. 


ETFs and SGBs are great investment avenues but they may not be of great help in financial emergencies. Gold loans are the answer to your problem in such situations. Sahibandhu with its hassle-free and streamlined offerings is the ideal choice for gold borrowings. Our dedicated and hands-on assistance is aimed at making your loan journey convenient, easy, and 100% secure.

If you own gold assets and are considering a loan, choosing doorstep services can provide you with a seamless and efficient borrowing experience.

Apply for a gold loan 24/7 on, or call at 18003098440

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Frequently Asked Questions

While both have their own benefits and disadvantages, it depends on your needs. Physical gold can be used in emergencies to get a loan against it, while ETF's biggest advantage is that it removes the hassles of storage and security. ETF functions just like a normal share stored in a demat account. There is no handling or storage charge.

SGB comes with a maturity period of 8 years and redemption is allowed only at the end of the 5th year. Hence, the lock-in period of SGB comes to 5 years. Therefore, it is not a viable investment option for short-term investors.

Interest income earned on SGB is taxed as per the respective tax slabs and there is no provision for TDS deduction on interest income. Moreover, if SGBs are held till maturity there will be no tax on the matured amount.

As per RBI guidelines, SGBs can be used as a collateral for availing loans from banks and NBFCs. You can reach for more info about loans against gold.

About the Author

Gold Investment: SGB VS ETF: Which is Better for You?

Hariom is passionate about organic marketing and branding strategies. He is currently leading the SEO team at SahiBandhu. Apart from SEO and marketing, his diverse interests include research, investment opportunities and case studies. He loves gaming and blogging and in his free time he is passionate about traveling and exploring different cuisines.

Disclaimer: The information provided on gold loans is for informational purposes only. There are a set of terms and conditions for gold loans that we follow and if you have any queries or want more information about gold loans, feel free to reach us at our toll-freetoll free number: 18003098440.

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