Bonds issued by Reserve Bank of India | Returns linked with market price of gold | Additional 2.5% interest p.a. (No TDS applicable) | Bonds tradable on exchange Invest Now

Sovereign Gold Bonds (SGBs) and mutual funds are two distinct investment avenues. SGBs are government securities denominated in units of gold. On the other hand, mutual funds allow you to pool your funds with other investors to buy securities. 


Knowing how they differ in risk and returns could help you decide which option aligns with your objectives. Once you have a strategic plan in place, consider investing in either on Bajaj Markets.

Sovereign Gold Bonds vs Mutual Funds

Investing in SGBs helps diversify your portfolio and offers a hedge against inflation. Meanwhile, mutual funds allow you to earn market-linked returns. 


Here is a detailed look at the differences between these two investment options: 


Sovereign Gold Bonds

Mutual Funds

Investment Avenues

Invest in SGBs on investment platforms and authorised banks online and offline 

Purchase funds through AMC companies, online platforms, and distributors


No additional charges

Expenses, such as fund management fees, are applicable

Investment Limit

No more than 4kg of gold for individuals and HUFs

No limit


You can take a loan against SGB; similar to a gold loan 

You can take a loan of up to a certain limit of the fund’s value


You can redeem SGB after the end of its lock-in period of 5 years

You can exit the scheme at any time, but premature withdrawal charges apply

Minimum Investment Needed

A minimum value of one gram of gold

You can start investing with a minimum of ₹100 through a Systematic Investment Plan (SIP)

Lock-in Period

5 years

No lock-in period (3 years in the case of ELSS)

Issuance Unit Value 

Denominated in grams of gold

Denominated in units


Annual interest is taxed at a marginal slab rate

Taxes are applicable based on the holding period and capital gains


Interest is paid twice a year, and returns are linked to the market price of gold

Returns depend factors like market conditions, type of fund, management of the scheme, etc.

Who Should Invest in Sovereign Gold Bonds and Mutual Funds

When investing in an SGB, you will own the gold in the electronic form. This can be traded on the stock market. You can consider investing in these bonds if:

  • You want to diversify your portfolio with gold investments

  • You are looking for a low-risk investment avenue that comes with assured returns

  • You want to eliminate the impact of making charges and GST

Mutual funds invest in various securities, including bonds and stocks. Here are some of the reasons to opt for mutual funds:

  • If you are looking for equity exposure without the risk associated with the stock market 

  • If you do not want to manage your funds actively and have a medium-to-high risk appetite

Frequently Asked Questions

SGB vs mutual funds: Which is better?

Both these investment instruments have their pros and cons. Sovereign Gold Bonds could be a viable option if you prefer a fixed income. On the other hand, mutual funds are subject to market fluctuations. Invest in them if you have a flexible risk appetite.

Who regulates Mutual Funds (MF) in India?

The Securities Exchange and Board of India (SEBI) is the regulatory body for mutual funds. It strives to protect the interests of investors.

Can you transfer SGBs?

Yes. You can transfer SGBs if the receiver meets the eligibility criteria before maturity.

What are the returns offered on SGBs?

By investing in a Sovereign Gold Bond, you could earn returns through capital appreciation. SGBs also provide an interest rate of 2.50% p.a., which is paid semi-annually.

Can I convert SGBs into physical gold?

No, you cannot convert SGBs into physical gold. You can only redeem them for money.

What is the minimum amount for investment in mutual funds?

You can start investing in mutual funds with an amount as low as ₹100 through the SIP route.

Are there no taxes applicable on investment in SGBs?

The interest that you earn on sovereign gold bonds are taxed as per your income tax slab. Capital gains will be tax-exempt on maturity.

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