3 Reasons To Own Sovereign Gold Bonds In Your Portfolio
Over the last 10 years sovereign gold bonds has regained it’s popularity as an investment. Sovereign Gold Bonds is one of the only investments that has maintained it’s value over the very long term, 100 plus years. There are several reasons for this and there are several reasons to own SGB’s as a long term investment in your portfolio in the future. The following are 5 reasons to consider owning Sovereign Bond in your portfolio.
- Sovereign Gold Bond Is Insurance
If you live in India and take out a homeowner’s insurance policy to protect you against a hurricane, you hope that you never have to use it. SGB’s ownership acts in a similar way by protecting you against financial collapse. Just like the premiums on homeowner’s insurance rises as after a catastrophic hurricane, the premium on these bonds ownership rises after financial crisis. It protects or insures you against the acts of central banks, political and economic uncertainty and civil unrest. Most importantly Sovereign gold Bond is one of the only assets that can preserve your wealth during a global currency crisis where all paper (fiat) currencies lose value.
- Sovereign Gold Bonds Can Not Be Printed At Will
The “shelf life” of fiat currencies is historically somewhere between 50-100 years. Simply put, fiat currency regimes come into existence and go out of business over time. The main reason is due to the fact that the central banks of a sovereign government can print the currency until it ultimately looses it value. This is known as inflation and is the main reason that movie ticket that now costs $10, used to cost.50 cents. Sovereign Gold Bonds on the other hand, cannot be printed by Central Banks “out of thin air.” Because different types of bonds cannot be inflated or printed like paper currency, it’s value is maintained during times of rapid fiat currency depreciation, as is the case in 2010-11.
- Sovereign Gold Bonds Protects You From Counter Party Risk
When you hold a SGB in your hand, you don’t have to worry if the financial entity that is Sovereign gold bond is going to pay you. It should be noted that Sovereign gold bond is a very volatile market and that SGB ownership should come only after personal due diligence and a written out plan, like dollar cost averaging to avoid buying at cyclical tops.
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