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Home / Money / Personal Finance /  How has gold fared when bought every year on Dhanteras?
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Indians flock to gold on Dhanteras for prosperity and good fortune. Looking at the yellow metal strictly from an investment perspective, it has indeed glittered for most of the past decade.

Gold purchased on Dhanteras 10 years ago has yielded annualized return of 6.56% till now. This is higher than the annual rise of 5.6% in the cost inflation index (CII) in the past 10 years. CII indicates the increase in the cost of goods and assets due to inflation.

Though gold has managed to beat inflation in the past decade, it has paled in comparison to other asset classes. BSE Sensex has risen nearly 13% since October 2011. However, it is worth noting that in the past 10-year period, gold bought between 2015 and 2020 has yielded double-digit returns (see graphic). On the flipside, gold prices have stagnated in the past one year and delivered negative return.

Tapan Patel, senior research analyst, HDFC Securities, said global economic recovery post covid-19 has led to a minor correction in gold prices in the past year. “Gold ETF inflows have also declined," he said.

Even then, financial planners advise against overdoing gold in one’s investment portfolio. It should only be included as a hedge against inflation and a cushion against market volatility. “There is empirical data to show that weak economic outlook buoys up gold prices and gold as an asset class does well when markets are turbulent. Both the reasons explain the sharp rise in gold prices in 2020," said Amit Suri, a Delhi-based financial planner.

 

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“Long-term past returns of gold will show that it delivers sub-optimal returns that cannot help fulfil financial goals. In some years, it has delivered returns lower than what a bank savings account offers."

If you purchase gold every year around festivals as a traditional practice, financial experts advise limiting your investment portfolio’s exposure to gold to 10%.

For the purpose of diversification, you can look at investing in alternative products, such as gold exchange-traded funds (ETFs) and gold bonds in place of physical gold.

“Investors should shift from buying gold the traditional way in the form of jewellery and consider paper gold for the purpose of investment," said Suri.

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