Key Scenarios You Need To Know About The Dematerialisation

There is a lot of confusion, rather lack of clarity with regards to Dematerialisation of physical shares. With this article, I have tried to give a gist of the process and provide a solution to common problems an investor might face who has physical shares and wants them to be dematerialized.


The Securities and Exchange Board of India (SEBI), on June 08, 2018, issued regulations pertaining to the mandatory dematerialization of securities for effecting transfers. The guidelines will be effective from December 05, 2018. This means post 5th December, all requests for transfer of shares will have to be in the demat form only.

Any transfer of shares in physical form will not be allowed after December 05 2018.
Having said that, this rule has 2 exceptions:

  • It is not applicable to the transfer of title of shares by way of inheritance or succession
  • Transposition of shares i.e. interchanging of the order of the name of shareholders
    will still be allowed after 5th December 2018.

Process of Transfer

The physical transfer of shares follows a process where the transferor and the transferee have to fill up a share transfer form (SH – 4). Share transfer forms have to be duly affixed of the value of 0.25% for the consideration of shares i.e. the stamp duty has to be paid @0.25 % of the value of the shares of the day the franking is done.
The stamp duty value of 0.25% has to be paid Online on if the amount of duty is less than Rs. 5,000/-. In the case of higher amounts, the stamp duty is to be paid through E-SBTR at the respective bank branches. Then the form has to be submitted to the respective local branch.
Once the SH4 form has the stamps affixed it has to be submitted to the respective registrars of the company along with the original share certificate, PAN of both the transferor and the transferee along with the supporting documents.

Please note that every round of communication with the registrar takes around 1 to 1.5 months, hence do ensure that the documentation should be in order for the smooth transfer of shares.

This process gets completed in 2 months if all the documents and shares are in order.

Key Scenarios 

Let’s consider situations other than transfer.

1) Loss of Share Certificate 

If one does not know the status of the shares or the holding or has lost his share certificates the process becomes challenging and time-consuming.
The status of the shares mainly includes the number of shares which change due to corporate actions like bonus, splits, merger or demerger or the shares may have been transferred to the IEPF A/c.

The basic status of these shares can be collected by asking the registrars. But generally, the registrars do not entertain such questions via phone call or personal visit. They are instructed not to give out any information on the phone calls due to security reasons.
In such case, the shareholder is advised to write a request letter for any query regarding the shares. The same goes through a long process and the revert is sent at the registered address of the shareholder.

The same process can be time-consuming as it takes around 25 to 35 days for any reply. If one does not receive the letter he has to write back to them asking them to dispatch the same again. It is advisable that the letter of enquiry should be furnished with self-attested copies of PAN and Aadhar for registrar’s verification.

Once the registrars have tallied and verified the applicant’s documents the reply is sent. In case the signature of the shareholder does not match as per their records or in case of any other discrepancies the registrar might ask for supporting documents like a banker’s verification or affidavit.

In case of loss of certificates, missing certificates or to apply for a duplicate share certificate the process may also involve FIRs, Affidavits, Indemnity Bonds and Declaration by a surety.


2) Death of a Shareholder


In case of death of a Shareholder, the joint holder needs to write to the registrar notifying the demise of the joint holder by attaching the death certificate along with the above-mentioned documents and request for the process to be initiated.However, in case of the death of a shareholder who was a single holder of the shares, the beneficiaries need to prove their succession.The documentation will differ and will be dependent on the value of the shares, the registrar of the company and whether there is a will in place or not.


All about IEPF

MCA has issued Investor Education and Protection Fund Authority Rules, 2017. As per these rules “Any money as dividend not claimed by an investor within 7 years and 37 days from the date of declaration of dividend, shall be transferred by the company along with interest accrued, if any, thereon to Investor education and protection fund (IEPF).
After 2017 even all Shares in respect of which dividend has not been paid or claimed for seven consecutive years or more have been transferred by the company in the name of Investor Education and Protection Fund (IEPF). There is a separate online procedure which has to be done to claim the dividend and shares from IEPF.First and foremost you have to make sure if the shares are in IEPF by enquiring with the registrar by using any of the above-mentioned ways. Once confirmed then start with the process at the earliest.

It is tedious which involves regulatory compliances to be done. The shareholder has to make an application in e-form IEPF 5 and mention all the details of shares and pending dividends and file with the Ministry of corporate affairs (MCA) and the company. This process of such transfer/ transmission/deletion takes more than 6 months and the shares are directly transferred to the demat account.


Unlisted / Delisted / Suspended Shares

There may be some shares where trading is suspended or they may be delisted. It is advisable to check the last traded price and if the value is not much then one can ignore them.If such companies are unlisted/delisted /suspended but still giving dividends, then It is recommended that these shares should be dematerialized.


It is a lengthy process but if the process is followed with discipline and with proper follow-up you will be getting a value for the physical paper in hand which is worth the effort. You may get frustrated and also get offers from 3rd parties who are willing to buy them at a percentage of the value but it is advisable not to exercise that option as there are chances that the shareholders might burn their hands and lose the shares in the bargain. Beware of sharks and stay informed.


Article  written by Neeraj Bahal

Personal Finance Lessons From Mahatma Gandhi


Father of the nation, champion of non-violence and promoter of peaceful co-existence, Mahatma Gandhi had numerous facets to his charismatic personality. He not only shaped the road-map of independent India but also gave us significant ideals to follow.

Despite living the life of an ascetic, he also championed personal financial freedom and self-reliance. He also insisted on truth and transparency, which are also needed in financial dealings.

Here are five essential personal finance lessons that we can derive from the life and teachings of the great man and ensure we truly live up to his legacy as proud Indians.

Have Definite Financial Goals 

Mahatma Gandhi’s life inspires us to maintain a long-term goal. His sole goal was to get India free from the British colonial rule which he achieved after a huge amount of patience and perseverance. Similarly, you should have definite financial goals, which can reap benefits in the long run and challenging times. Understand your financial goals, break the long term goals into smaller ones and then choose the right investment options to fulfill each of the smaller goals and in turn the bigger long term financial goal.

Maintain Self-Discipline In Investment 

Gandhiji lived a life of self-discipline and simplicity. He had meager possessions and ate simple vegetarian food, which he called key to a happy and healthy life. Not only did he practice what he preached, his self discipline made others follow a similar lifestyle of simple living and high thinking.

Likewise, self-discipline is very important to achieve financial goals successfully. You should not deviate from your goals and adhere to your investment rules rather than following your friends or neighbours. Maintain self-discipline and avoid going for that elusive magic investment vehicle that may offer too good to be true returns.



The road to freedom has been a long one with many lives sacrificed and many challenges overcome along the way. The freedom struggle went on for decades as the Mahatma persevered along with his followers. Perseverance is key in both life and financial investments. Once you make your mind on a financial goal, and opt for the right investment instrument, perseverance is what will take you to your final destination. The road may be a long one but will ensure you reach your financial destination surely.


Self Sufficiency 

Mahatma Gandhi was one of the first to underline the significance of self sufficiency of rural India as the key to India’s progress.In the financial world, self sufficiency is just as significant but can also be largely ignored in larger scheme of things. For example, having Life and Health Insurance can mean one’s family is self sufficient even in the unfortunate events such as death or health emergency. Yet many individuals seek insurance plainly to save tax or to invest while ignoring the real need for insurance.

Believe In Simplicity, Insist On Truth

Gandhiji lived a simple life which was transparent and inspiring. Likewise, our financial investments are best when they are less complicated. Investing in instruments offering assured returns, for example, can lead to peace of mind without having to constantly worry about risks and market fluctuations etc. If you’re buying an investment or insurance product, insist on the complete truth about what that product may mean for you, and avoid regretting a poorly-thought decision later.

Article contributed by Adhil Shetty

You are different and so are your needs

How many of you want to wear the same clothes as your friends or neighbours? Not only is your size and fit different, your taste too will likely be different. And importantly,  you want to look different and feel different. But when it comes to investments, why is it that you think FDs suit you because they suited your father, or the insurance policy your neighbour bought or the mutual fund your colleague bought, is what you also need? Just as your clothes need to be tailored to suit you, your investments need to be tailored to your needs.  What may suit someone else may not suit you. Nor would they give the same results. This article is about how your unique needs call for unique investment decisions.

Your goals are different

In all aspects of life, what our friends, colleagues, or other people do have an influence on us. More often than not, you hear about a fund that gave enormous returns. Or how investing in a particular fund was a bad decision. Or the claim that FD is the most stress-free option. You have multitude of opinions coming from various sources. But acting based on just that can be detrimental.

You may ask how your goal is different, if you are saving for your retirement and so is your friend. Yes, some goals are generic. Like retirement, education or just wealth building. But do you have the same number of dependents? Are you going to send your kids to the same college? Or do you envision a similar kind of lifestyle? There are distinctive characteristics about your life that make each of your goals different. How much you will need will also depend on when you need it and how much you already have. You may start investing for your retirement by the age of 35 while someone else started only at 45. With a longer time frame, you can up your portfolio risk.

Your risk profile is different

More importantly, your appetite for risk is also different. By that, I don’t just mean the risk you are willing to take. There are also other factors. Whether or not you have a stable income, loans to tend to or other commitments; all have an effect on how much risk you can take. Someone may have ancestral assets to fall back on, while you need to build your own assets. Some of you may be prone to higher medical expenses while some are not. And these, in turn, will determine how much risk you can actually take.

You deal with your investments differently

Finally, there are behavioural aspects. Running SIPs on different dates spread throughout the month may help you catch volatility. But let’s say, you are the kind who doesn’t have a track on your bank balance and a SIP date falls somewhere in the last week of the month. It may so happen that you don’t have enough balance in your account and it gets bounced. In that case, you are better off with SIPs in the first week of the month. With the return differential between different days being very low, you will lose more by skipping an SIP.

In that way, your attitude towards money and how you manage investments can vary. And you need to figure what works for you. Spending patterns and how you prioritise needs are unique to you. Systematic plans, be it SIPs, STPs or SWPs can come in handy. According to your requirements, they can be used for different purposes.

Therefore, making investment choices is simply not limited to going for a fund that a friend told you about or picking from the top performers. For an investment to work for you, all the risks and limitations should be considered. So should be the opportunities and strategies that may give you optimal returns. Talk to your advisor today to make sure you are on the right track.


Article by Ashwini A

Banks have no liability for loss of valuables in lockers: RBI

Safety is sometimes illusionary. Many of you might think your valuables are safe in the bank lockers, but if you read the terms and conditions of the Banks’ agreement for a locker facility, you can’t hold the bank accountable for any damage to your belongings placed in the locker.

A typical agreement would read like this—“The Bank shall not be responsible or liable for any loss or deterioration of or damage to the contents of the Locker whether caused by rain, fire, flood, earthquake, lightening, civil commotion, war, riot or any other cause/s not in the control of the Bank and shall also not be liable or responsible for any loss, sustained by the Hirer/s by leaving any articles outside the Locker.”

As reported by Financial Express dated June 26, 2017, RBI has also noted that “banks have no liability for loss of valuables in lockers”, which, in a way, has given banks the go-ahead to shrug off their responsibilities towards providing safety for your valuables.

However, consumer activists and experts don’t agree with this and believe that since banks charge a fee to provide the locker facility, they should be held responsible for damages. In fact, some experts suggest that any loss of your valuables or property occurring due to the bank’s negligence will qualify you to knock the doors of National Consumer Redressal Commission (NCDRC). And, you are likely to get justice as well.

While speaking to Press Trust of India, Mr Bejon Misra, a consumer-rights activist and the founder of Consumer Online Foundation said, “The Government, the RBI and the banking industry cannot wash off their hands and earn money from consumers and not be made liable or accountable for quality of service for which the customers are paying rental.” He went on to add that, “It (a bank not being liable for loss of locker contents) is an anti-consumer policy.”

It seems bankers are unimpressed with this view as there is no response from any of them. On the contrary, in response to an RTI query, 19 Public Sector Banks (PSBs) had stated that they shouldn’t be held responsible for any damage to the contents contained in lockers.

However, experts are not biased against the banks as they have also highlight the need to bring transparency and accountability to the operation of the locker facility. This means that it should be mandatory for locker-holders to report the contents of lockers based on which banks can opt for group insurance policies. Unless they don’t know what’s being held in the locker, they can’t be entirely held responsible.

At the moment, bank officials are making the “non-disclosure” an excuse to dismiss their responsibility. This loophole can be easily plugged by making simple changes to the rules governing locker facilities. It seems after demonetisation, lockers have become an unattractive business for banks.

What should you do to preserve your belongings?

  • If you buy gold in physical form purely from the investment perspective, you can choose an option of buying Sovereign Gold Bonds or simply invest in gold ETFs (Exchange Traded Funds) instead.
  • Go for a comprehensive home insurance policy when storing valuables at home.
  • While you opt for a locker facility, pay attention to bank’s record in protecting lockers. If there’s any instance of burglary in a particular branch of a bank, don’t take chances. Search for a more reliable bank that takes the safety of lockers seriously.
  • Report all your income and disclose all your assets, wherever required by law.

By adopting these simple measures, you can safeguard your property and valuables.


Source : Times of India and ET

Sick and tired from the tricks of your builders – Dont worry – RERA is the solution (Real estate regulation & development Act)

I come across many problems that are usually faced by real estate buyers ..  

  • The deals are not transparent. Buyers are often charged as per the super-built-up area.
  • Property buyers can’t do much if there’s a deficiency in the construction or in the    amenities provided.
  • Projects are often delayed. Consumers are not compensated when builders fail to keep deadlines, but if their payments are delayed, they are usually charged penalties.
  •  Funds are sometimes siphoned off and projects are permanently terminated. In such  cases, recovering money from the builder becomes a herculean task for the individual home buyers.

The Rajya Sabha cleared the way for Real Estate Regulation and Development Act (RERA Act) in March 2016. The Government is now planning to implement it from May 01, 2017, after completing all formalities associated with the implementation of the law. 


What will change for the developers and the real estate buyers?


  • The developers are expected to maintain minimum 70% of the money collected from potential buyers in an escrow account opened with a bank, to be utilised exclusively to meet the cost of that project.
  • Every project with the proposal of developing 8 flats or acquiring 500 square meters of the plot will have to be registered with the regulator. If the project is to be completed in phases, each phase needs to be registered separately. If the developer fails to do so, he will have to pay a penalty of upto 10% of the project cost, and if he /she becomes a habitual offender, he/she can be jailed for 3 years.
  • Developers will have to sell flats on the basis of carpet-area. Selling apartments at built-up and super-built up rates is prohibited under RERA.
  • The builder would be held responsible for structural defects in the first 5 years.
  • If the project is delayed, the developer will have to pay the interest to the customer.
  • The developer need permission from a minimum of 2/3rd of allottees to make changes to the original plan.
  • Availing insurance for the land titles would become possible
  • Appellate Tribunals and Regulatory Authorities will have to dispose of complaints within a stipulated time period.
  • Even property brokers will also have to register themselves under RERA.
  • Furthermore, they can advise their clients only about registered projects. They shall operate only within the specified territory or state. If they are found violating any of these provisions, they can be penalised. In other words, brokers can’t scuffle shrug off their responsibility and accountability towards their clients.
  • Buyers will have to ensure that they take possession of property within 2 months of project receiving the Occupancy Certificate (OC) .


Although RERA is a comprehensive law, implementation is the key. It fails to fix the accountability of the Government departments involved in sanctioning the projects. There is no provision of single-window clearance system for obtaining approvals. This might cause inconvenience to genuine developers.



Where to invest 7th Pay Commission bonanza?

The Union Cabinet has considered the recommendations of the seventh Pay Commission and has announced 23.55% increase in pay and allowances of serving central government employees and 24% increase in pension of retired officers.

The increase in pay would be Rs 39,100 crore (16 per cent increase), increase in allowances would be Rs 29,300 crore (63 per cent increase) and increase in pension would be Rs 33,700 crore (24 per cent increase), thus settling down to an overall increase of 23.55 per cent.

Interestingly, the expenditure on account of HRA is likely to go up from Rs 12,400 crore to Rs 29,600 crore, an increase of Rs 17, 200 (138.71 per cent). The benefits will be effective from 1st January, 2016 and the total financial impact in 2016-17 itself is likely to be Rs 1, 02,100 crore. Cabinet will decide if the six months arrears will be paid at once or in the form of installments.

Government employees should make use of the opportunity to bring their finances on track, just in case if there are not. The funds need to be judiciously used between creating an asset for the long term and also getting rid of the debt at the same time.

The actual allocation towards investment will depend on how much of arrears one receives as lump sum and how much increase in salary has taken place. However, the approach for all those receiving the benefit of 7th pay commission remains more or less the same. Firstly, get rid of debt and thereafter make your money work harder.

Shake-off that debt: Any credit card outstanding should be immediately paid-off in total so as to save 40 per cent or even higher of interest charges in them. Personal loans and credit debt represent destructive debt and should be paid off at the earliest. If there is a home loan, allocate a portion of the lump sum arrear towards repaying the principal portion of the loan. Home loan represent constructive debt, however, paying it off early reduces interest burden thus increasing the home equity.

Bolster emergency fund: Consider bolstering one’s emergency fund to meet at least those big expense heads for which investments need not be dipped into. The risk of job-loss for government employees is low hence park an amount equal to about 3 month’s expenses ( 6 months ideally suggested for non-government and businessmen) in savings or liquid funds for immediate liquidity.

Taking guard: Group insurance provided by government if not sufficient, one may enhance through pure term insurance plan. As a thumb rule, one should have life cover of at least ten times of annual income. Consider buying online term plan that comes at premium nearly 25 percent lower than offline term insurance plans. Don’t go merely for lowest cost plan but choose an insurer with whom you are confident of. If health insurance group cover is not sufficient, consider buying adequate cover for self and family members including children. Family Floater health insurance plans may suit young families with children up to age 25. Having bought a health cover, add a critical illness plan especially at age around 40.

Spending: Only once the debt is taken care of and adequate protection of life and health is put in place, consider making investment decisions. Many big-ticket purchases could have been postponed till now. From upgrading to new car, to buying a diamond necklace for spouse, there could be other consumer goods waiting in the wings. Remember, income minus savings should meet the expense.

Caution ahead: Expect a lot of offers and deals for government employees. Choose among them carefully. Spend on items that probably you had waited for and not which looks enticing now. Avoid life insurance plans especially where commitment to pay is long or if asked to buy for investment purpose.

Investing right: It’s time to re-look at one’s financial plan. See, if your goals especially the long term ones are well identified, estimated and funds earmarked towards them. If not, start the process and initiate SIP in 3-5 consistently performing equity mutual funds for long term goals.

If you have a lump sum to invest and worried about the valuation levels and uncertainty in the market, make use of the systematic transfer plan (STP) in mutual funds. STP works like systematic investment plans (SIPs). Just that, in a STP, an investor typically puts in a lump sum amount into a liquid fund and then systematically transfers it into an equity fund. In an SIP, the instalments are transferred directly from the investor’s bank account to the fund. So, if you have Rs 1 lakh to invest, it first goes into a liquid fund. From the liquid fund, every week or month, a fixed sum (say Rs 4,000 per week or Rs 16,000 per month) is invested into an equity fund. The residual amount in the liquid fund continues to earn interest, while the investment into equities is staggered over a period of time.

The interest rate appears to be on the downward slide. For investors looking at fixed deposits, this could be the time to take advantage. But, there are minuses too.

The real estate prices have stagnated across cities in the country and the picture appears grim considering the demand-supply equation. Avoid buying property for investment purpose with aim of capital appreciation unless it is entirely self-financed and has a locational advantage. The current situation however can be good for buying for self-use. Search and identify properties and thereafter negotiate with builder for price-cut or discounts. Home loans are currently linked to bank’s MCLR and are supposed to reflect the changes more frequently than in the base rate era.

On the other hand, government is reportedly looking at a scheme for encouraging its employees to invest part of their 7th Pay Commission salary hike in a fund which would be used for recapitalisation of state-owned banks. High income government official, according to sources, could be roped in to invest in the fund by offering lucrative incentives like tax break or higher return.


Source : ET

Chasing returns is not about the money

Let me share the story a young guy who has just graduated. He recently got a nice job with a company and is able to save around 2 lacs per annum after all his expenses.

Now this guy is quite similar to all his peers, but different from his hot blooded brethren only on one small point. He believes in saving and investing, but does not want to chase stock market returns. In the last few years, he read a few books on investing by john bogle, and decided that he was going to invest in some decent mutual or index fund and then leave it at that.

You see, this young guy has a girlfriend and wants to spend time with her. In addition, he also wants to use his spare time pursuing hobbies like painting and travelling.

He sets up a simple plan:

–  Save 2 lacs per year and invest it in a few index/ mutual funds

 – Increase his savings by 5% every year to match inflation

 – Invest each month via an SIP to put it on autopilot

 – Avoid financial news on TV and use the spare time on other pursuits

Ten years later this guy who is now married, decides to have a look at his investment account. During this period, the overall market has delivered around 15% per annum for the last 10 years. He finds that his account is now around 67 Lacs. Not bad!

He goes back to his usual life and forgets about this whole stock market thing. The only time he checks is to extend the SIP in his account as most banks don’t provide a 10 year SIP option

Its twenty years now since he started and one day his wife asks him if they have decent savings which can be tapped for their daughter’s education, 10 years from now.

He goes back to his account and is pleasantly surprised to find that the account now has 3.7 Crs. He is confidently able to tell his wife that they truly afford a good quality education for their children.

At the age of 55, its time finally to fund their daughter’s education. Our guy, who is no longer as young, decides to look at his account and finds that the account has 16 crores!! This is far more than he ever imagined. Both he and his wife now start thinking of taking an early retirement. They figure that in 5 years’ time, the account would grow to around 29 Crs ** at the current rate if they can fund their daughter’s education from the liquid cash they have been holding on the side. This amount would be sufficient to retire and lead a comfortable life

Now I know some of you would raise objections like

–           15% consistent returns are good in theory, but the actual returns are more lumpy.

–           Not everyone can save 2 lacs or do that without fail every year

Let me handle them both –

If you save consistently and do not withdraw the capital from the account, a smooth or lump 15% would still amount to the same in the end. It is only when people act smart and try to time in and out of market (and change the amount invested), that the eventual amount depends on the pattern of returns.

In addition, our overall stock market has delivered around 12-13% return in the last 20 years and if you add dividend and the effect of monthly cost averaging, a 15% CAGR is quite reasonable

On the second point, 2 lac saving per annum may not be possible for everyone, but I am sure a lot of two income professionals can muster this level of savings. In addition, I have assumed that the contribution rises only at 5% per annum. In most cases, earnings and hence savings can rise faster than that.

So my point is this – If the objective is to meet your personal financial goals, then discipline in saving and investing consistently is far more important than chasing the next hot sector or hot stock. Of course, higher returns will get you to your goals faster, but beyond a level of wealth, it more about flaunting than about its utility.

However, If the reason for chasing returns in the market is to get on TV or twitter to show the world how smart you are, then we are talking of a completely different objective. In such a case, the actual returns have nothing to do with the money or financial goals.

** If you wondering about the impact of inflation , a 6% inflation would still mean a nest egg of around 3.8 Crs in current money terms. In my books, even this is a good amount of money

Article by Rohit Chauhan

Best Option to Invest in Gold

You would think an Exchange Traded Fund or a gold fund is the answer to the best way to invest in gold. And you would be right, until a few months ago. But when the government came out with its Sovereign Gold Bond scheme in November last year, the advantages gold ETFs had paled considerably. Now, with taxation changes proposed in the Budget last month, Sovereign Gold Bonds now thoroughly eclipse any other mode of gold investing.

The third tranche of Sovereign Gold Bond issue is open from today to 14th March. The issue price for this tranche is fixed at Rs 2916 per gram of gold.

Interest income Sovereign Gold Bonds are issued by the Reserve Bank of India and have a solid government backing. The maturity of each bond is eight years from the date of issue with an exit option from the fifth year. They can be held on behalf of a minor or even jointly. You will be issued a Holding Certificate for the gold and this can be converted into demat form. The bonds are denominated in grams.

The issue price is arrived at by averaging the preceding week’s gold price. In this tranche, say you want three grams of gold. You will have to invest Rs 8,748. At the time of redemption, the prevailing market value of these three grams will be paid out. The redemption price is arrived at the exact way the issue price is fixed. Therefore, you do get the potential of capital appreciation. That’s true for gold ETFs too.

But here’s the first way the Sovereign Gold Bond scores. The bonds will pay an interest of 2.75 per cent per annum, payable every half year, on the amount of the initial investment. The last interest will be paid out along with the redemption proceeds. An interest of 2.75 per cent looks measly. But all other forms of gold investments – coins, jewellery, ETF, gold funds – have no interest payment at all. An investment of Rs 10,000 will earn an approximate amount of Rs 2,200 over the course of 8 years in interest alone. And remember, this income is in addition to the potential capital appreciation.

Taxation benefits In physical gold, gold ETFs, and gold funds, long term capital gains are taxed at 20% with indexation benefit. In a Sovereign Gold Bond, long term capital gains are not taxed if the bonds are held to maturity. This is the second big advantage of these bonds. The change in taxation of these bonds was announced in the Budget last month.

Of course, if you transfer the bonds (this is allowed from the fifth year from date of issue) before maturity, your gains are not tax-exempt. The question of short term capital gains does not arise since the minimum lock-in for these bonds is five years. Interest is treated as income and taxed accordingly in your hands. Even so, overall returns if gold prices appreciate will be higher than other gold investments.

Better prices The primary benefits of sovereign gold bonds are the two listed above. The other benefit is better prices. Gold jewellery carries the drawback of making charges and wastage, whether at the time of buying or selling. Storing the gold safely is an added cost due to locker rents. You would also need to put in a bigger sum to buy gold jewellery. Gold schemes run by jewellers are not risk-free either. Financial gold (ETFs, gold funds, sovereign gold bonds) don’t suffer from any of these drawbacks.

But ETFs and consequently gold funds have one risk. The traded price of ETFs may not accurately reflect the underlying gold price or NAV because of demand-supply market volumes. Your gains, therefore, will be different from the gold price trends. Sovereign gold bonds don’t have this possible risk.

The bonds will be listed on the exchanges by the RBI after a specific date and can be traded. The bonds can be used as collateral for loans as well, subject to the same loan-to-value conditions as physical gold loans. You need to fill up an application form, comply with basic KYC, and pay for the bonds through cheque, DD, or electronic modes.

As far as gold investment goes, the combination of interest income, capital appreciation, and favourable taxation make sovereign gold bond funds stand above other gold instruments. You would, however, have to necessarily have a long-term horizon when you invest in sovereign gold bonds due to the long tenure. But since gold investments are meant as a hedge for inflation and for portfolio diversification, such a long term horizon will actually be a good fit.


Article by Bhavana.A






What Can You Learn From Well Behaved Investors

Movement in the markets depend on 2 factors – One is the actual numbers like growth rate, company performance, prices of commodities and local and global economic conditions. The second is the behaviour of the market participants that is the people and their beliefs, sentiment, fears, optimism and pessimism. We think second factor is more important & that’s the reason we keep repeating… Investing is not a number game, it is a “Mind Game”.

It is not enough to have only technical and financial knowledge if you want to be a successful investor. You should also manage your emotional quotient properly. Some investors do better than others in investing. One of the main reasons is that they behave appropriately in different market conditions and while taking investment decisions.

What Can You Learn From Well Behaved Investors

What these investors do different to be more successful –

1) Sometimes it is okay to not make any investment decisions –

There are a lot of news items on the economy, prices, markets all over the place. Many investors constantly want to keep doing something. They want to buy or sell else they feel left out even if they do not understand where the markets are heading. well behaved investors  take a step back and take time to assess the situation. It might be profitable in terms of time, money and mental peace to not react to market movements and wait till the markets are more steady or make more sense.

2) Loss Aversion –

Sometimes as investors, we do make the wrong purchase decisions. Sometimes, due to economic conditions or company performance the stocks/sectors that we thought would perform well do not perform as expected. It’s important to keep asking a simple question to ourselves – If I weren’t already invested in this ……, how much would I invest in it now?” It is difficult for most of us to admit that we made a loss or sell and accept the loss.

3) Overconfidence –

Many investors tend to be overconfident and estimate their ability to pick investments that can give very high returns to be very good. This can backfire as the investments picked may not give the most optimum returns or even run into losses. It is even worse if the investors overlook the mistakes they have made due to overconfidence. Well behaved investors estimate their investing capabilities realistically. They try to improve their skills in different ways and also take the help of professionals to make the right investments

4) Understand the difference between skill and luck –

Sometimes we make profits or get high returns from our investments because we have made the right investment decisions and sometimes it is because of a little luck. Well behaved investors know and acknowledge the difference. If we attribute all profits to our skills and capabilities and all losses to bad luck, we may not be interpreting correctly. This will impair our rational behaviour and we will not take steps to improve our investing skills.

5) Keep emotions out while investing  –

Humans have a range of emotions – greed, humility, impatience, fear, self-confidence levels, frustration, anger etc. These emotions can play into an investor’s mind and bias the investment decisions. Some people are scared of making any decisions which might make them lose opportunities to make money. well behaved investors keep emotions and intellect required for investing separate. They do not let emotions cloud their mind while deciding on their next move. They may not watch the market closely but learn and assess rationally. Just as professional investment managers behave rationally while taking investment decisions. Well behaved investors also do not have extreme reactions for profits and losses. They continue with the right strategies and change the wrong ones.

6) Well behaved Investors are disciplined and persistent –

Well behaved investors are disciplined when it comes to investments. They stick to investing rules. They have a well-thought-out investment strategy in place and follow it even if there are sudden changes in the market. They update their strategy only if it is required. They have certain standards and make sure they follow them. For example, a well behaved investor might have kept a target to sell a stock that he owns when he gets a  return of X%. Now if the market swings wildly and the stock keeps going up, he will not get greedy and wait for the stock to go Y% higher to sell. Chances are that the stock might drop to much lower levels and he will end up getting less profits or even make losses. Of course it might happen that after he sells as per his target, the stock price goes higher. But if there are no indicators of the same earlier as per his analysis, he would stand by his strategy.

7) Well behaved investors are also persistent –

They work hard and persistently follow their investment strategy. They keep updating their knowledge and look for opportunities. They review the investment strategy and update it  as required. They will not succumb to market tips and rumours. They would have set their financial goals and work towards achieving them.

Many of our investment decisions are clouded by behavioural aspects. We should emulate well-behaved investors to be successful investors. To begin with, we should find out which emotional aspects affect our investing capability and then work on each of them so that they do not affect investment decisions negatively.

Article by Mr Hemant B