Why Gold Jewelry is Not a Sound Investment?

Nutan Gupta

01 Jun 2017

New Page 1

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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Why to Choose Mutual Funds Instead of Directly Investing Into Equities?

Whether to invest in equities or mutual funds is a question that has plagued every investor. As someone who needs the best value for his/her investment should you invest in equity directly or via mutual funds?

Let’s start by first understanding what these two terms ‘equities’ and ‘mutual funds’ stand for-

Equities- Equities generally represent ownership of a company. If you own any equity in a company, you are a part owner of the said company (depending on how much equity you own).

Mutual Funds – It is an investment scheme which is professionally managed by an asset management company. It pools together the resources of a group of people and invests their money in equities, debentures, bonds and other securities.

Why choose mutual funds over equities?

For people who’ve never invested in either stocks or mutual funds, it is hard to know which is better and where to start. Broadly speaking, if you are a novice investor, mutual funds are not only less risky but also way easier to manage. Here are some ways in which investing in mutual funds is beneficial as opposed to investing in equities -

Diversification

Mutual funds provide more diversification as compared to an individual equity stock. When you invest in equity, you are investing in a single company which has its inherent risk. For example, if you invest Rs.20,000 in buying equities of one company, you could face a total loss if that particular company performs poorly in the market.  

If you invest the same amount in mutual funds, it will be invested in different kinds of stocks and financial instruments, high-risk and low-risk both, so you might not face total loss even if one company does poorly.

Scale of Investment and Lower Costs

For an individual investor buying and selling stocks is a difficult task due to its high price. Thus, any gains made from stock appreciation are nullified if the overall trading costs are considered. Comparatively with mutual funds, as the money is pooled from a large number of investors, the cost per individual is lowered.  

Another advantage of mutual funds is that you don’t need to invest large sums of money. Buying equities for a profitable venture needs huge amounts of money, a minimum of few lakhs. With mutual funds, you can start with Rs.1000 and earn profits on that as well.

Convenience

Keeping an eye on the markets everyday is a time-consuming business, especially if you are investing as a side gig. There are people who spend their lives studying the market and still end up sustaining heavy losses. Though investing in mutual funds does not guarantee high returns, it is stress-free and needs less work as compared to investing in equities.

To sum it up

It is important to remember that mutual funds have their own disadvantages as well. Thus, as with any financial decision, educating yourself and understanding the suitability of all the available options is the ideal way to invest. 


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Why Gold Jewelry is Not a Sound Investment?

Nutan Gupta

01 Jun 2017

New Page 1

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.

Have Referral Code?