February 3, 2024

Sovereign Gold Bond Vs Mutual Fund

Sovereign Gold Bond Vs Mutual Fund

The main difference between Sovereign Gold Bonds and Mutual Funds is that Mutual Funds invest in various assets like stocks and bonds, while Sovereign Gold Bonds are government-issued securities specifically linked to the price of gold, offering a direct investment in the precious metal.


What Is Sovereign Gold Bond?

Sovereign Gold Bond is a government-backed investment scheme in India where you can buy gold bonds instead of physical gold. It allows you to invest in gold conveniently and securely, offering interest and capital gains benefits.

What Is Mutual Fund?

A Mutual Fund is like a shared investment fund where many people contribute their money to buy a mix of stocks, bonds, and other assets. It’s a way for individuals to spread their investments and be part of a professionally managed portfolio.

Sovereign Gold Bond Vs Mutual Fund

The key difference between Sovereign Gold Bonds and Mutual Funds is that SGB offers an extra interest rate, like a bonus, on top of your investment, while Mutual Funds don’t have this fixed additional amount and rely more on how the market performs for returns.


Sovereign Gold Bonds provide liquidity through a stock exchange, allowing you to sell them before maturity. In contrast, Mutual Funds are traded throughout the day, offering flexibility for investors to buy or sell at market prices.

Lock-in Period

Sovereign Gold Bonds have a fixed maturity period, typically 8 years, encouraging a long-term investment approach. Mutual Funds generally have no specific lock-in, offering investors the flexibility to redeem their units at any time based on their financial goals.

Tax Implications

Interest earned on Sovereign Gold Bonds is taxable, but capital gains are exempt upon maturity. Mutual Fund returns may attract capital gains tax based on the holding period. Understanding the tax implications is crucial for effective financial planning.


Sovereign Gold Bonds offer limited flexibility as they have a fixed term and can be traded on stock exchanges. Mutual Funds provide greater flexibility, allowing investors to choose from various schemes with different risk levels and investment horizons to suit their financial preferences.

Risk and Return

Sovereign Gold Bonds offer low risk with government backing and fixed interest, while Mutual Funds vary in risk, potentially providing higher returns but with increased market-driven risk.

Expense Ratios

Sovereign Gold Bonds have lower expenses, being government-issued. Mutual Funds may have higher expense ratios, covering management fees and impacting overall returns. Understanding these costs is vital for assessing true profitability.

Sovereign Gold Bond Vs Mutual Fund – Quick Summary

  • The key difference between Sovereign Gold Bonds and Mutual Funds is that Sovereign Gold Bonds provide a fixed additional interest rate, like a bonus, while Mutual Funds’ returns depend on market performance.
  • A mutual fund pools funds from multiple investors to invest in a diversified portfolio of professionally managed stocks, bonds, and assets.
  • Sovereign Gold Bond is backed by the Indian government and offers a secure way to invest in gold through bonds with interest and capital gains benefits.
  • Sovereign Gold Bonds are government-issued and directly tied to gold prices, while Mutual Funds invest in diverse assets like stocks and bonds.
  • You can open a free demat account with Alice Blue in just 15 minutes and then easily purchase Sovereign Gold Bonds.

Sovereign Gold Bond Vs Mutual Fund – FAQs  

1. What are the differences between Sovereign Gold Bonds and Mutual Funds?

The main difference between Sovereign Gold Bonds (SGBs) and Mutual Funds is that SGBs are direct investments in government securities linked to gold prices, while Mutual Funds pool money for diversified investments in various asset classes like stocks and bonds.

2. Which is better gold or mutual funds?

Choose gold for safety against economic uncertainties; opt for mutual funds for diversification and potential returns. Assess risk tolerance and goals for the right choice.

3. Is Sovereign Gold Bond a good investment?

   SGBs can be a good investment for those looking to invest in gold with the benefit of earning interest. They also offer tax advantages. However, their suitability depends on your investment portfolio and objectives.

4. Are bonds more risky than mutual funds?

   It depends on the type of bonds and mutual funds. Government bonds like SGBs are generally considered less risky than equity mutual funds. However, corporate bonds and bond funds can carry varying levels of risk. The risk of mutual funds depends on their underlying assets.

5. Is Sovereign Gold Bond eligible for 80C?

   No, SGBs are not eligible for deduction under Section 80C of the Income Tax Act. However, the interest earned on SGBs is exempt from capital gains tax if held till maturity.

6. Who should invest in gold mutual funds?

   Investors looking to diversify their portfolio and gain exposure to gold without owning physical gold can consider gold mutual funds. It’s suitable for those with a moderate risk appetite.

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