Why Gold Jewelry is Not a Sound Investment?
Gold is one of the most precious metals in the world. It plays a major role in almost all the cultural celebrations. Having a lot of aesthetic and historical value, it has been passed on from generations as a symbol of security and trust. Neha had purchased a gold necklace, earrings, and a golden bracelet as a security investment during her marriage. But, a few years later, when she and her husband faced financial crises, the gold could not be mortgaged at the price they hoped to get. The return on her investment was still less and she had to mortgage her home for a better price.
Gold jewelry is good from a visual point, but using gold jewelry may not be the right choice in today’s time. There are other financial instruments that you could invest and get better returns than from gold.
Some of the reasons why gold is not the best investment options are:
A costly investment
Making gold jewelry involves a lot of costs. If you are to buy ornaments of gold, it includes the making and wastage charges along with the price. This is then reduced when you try to resell it in the market. So, it can lead to about 30% loss of your invested money. This can reduce your profits significantly.
Capital appreciation is scarce
Investment in gold gives comparatively less profit. The capital appreciation from gold is less than real estate and equities. Even though the prices tend to usually rise every year, gold prices barely manage to outperform inflation marginally. You might lose more money while holding gold jewelry than while investing in equities.
An inefficient investment vehicle
Even though it is regarded as a precious metal, gold is not as popular as an investment vehicle. Modern investors see gold as an inefficient vehicle for investment. Getting your gold, storing it in security safe at home or depositing into a safe box at the bank also have an additional cost. Not to mention the various risks associated with it. So, even though you own your gold, you might have to store it with someone else who would be charging you for that service.
No tax benefits
One of the goals that people look for while investing is to save tax. Having gold jewelry is not beneficial from a tax standpoint. Capital gains from equities also become tax-free in the long term but there is no such benefit for gold assets. Hence, investing in them might not provide you any tax deductions or exemptions.
Does not match expectations of serious investors
Gold was an investment vehicle since before the boon of internet and mass communication. It no longer holds the same value in terms of returns on investment. Stocks earn the most returns followed by government bonds and other debt instruments. Gold provides the least growth among all. Hence, it is good as a safety instrument but if you into serious investing and expect returns, this might not be your best option.
To sum it up
Gold jewelry does not have much use in the financial market. You can invest your money into it for safety purposes but the purity of the gold would also matter. Only the 24 karat gold does give much value of the investment. Others have some amount of other metals mixed in it, reducing the value proportionately. You might get two different prices for your gold jewelry from two different shops. Hence, choose your investment option wisely keeping your goals and potential returns in mind.
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