Why you should avoid buying gold this Akshaya Tritiya?

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Akshaya Tritiya is very momentous occasion.  It is also known as Akha Teej and is considered as the most special day of the year for Hindus.  It is a holy day in Jain calendar as well. Akshaya means the most “Everlasting”  which means never-ending or lifelong. In India, people believe that any initiative made on this day is considered to be good fortune. The most famous activity is purchasing gold and is a sign of success or never-ending good fortune for the buyer. Moreover, starting a new business on Akshaya Tritiya can be useful for new investors. On this particular day, gold dealers lure customers by offering discounts. So Akshaya Tritiya seems to be the commercial festival for gold dealers.

Why is only Buying Gold So Auspicious On Akshaya Tritiya?

The big question that naturally arises in anyone’s mind is why do people usually go just for buying gold than other valuables? Well, its because Indian people see gold as an investment opportunity regardless of whether it will actually give good returns to them. One has to accept that ladies get gold as a gift on several occasions as their birthright. Gold returns are not very good one these days. Moreover, if we compare it with other investments, gold tend to provide much lower returns.

Is Gold considered an investment?

The next big question arises is if investment in Gold is good enough to get returns? Is gold really an investment? Well to be precise, gold itself as an asset does not have any earning power in comparison to other investments. Investments in other asset classes like equities, bank deposits, government bonds, corporate bonds have an earning power. In other words, this means that when you invest in a particular stock or bond of a company, the company will spend this money to further grow itself, make wealth and also contribute to the economy of the country. Similarly, when you invest in bank deposits, the bank further gives loan out of this money in the market, to individuals and companies that need it to help grow their businesses.

If we talk about Gold returns, it is not even in line with the inflation rate in the long run. Moreover, post-tax returns are way lower as compared to other alternative investment options like equity, debt. Further, we would not receive any current income just like dividend on stocks or rental income on real estate if we only invest in gold. Thus it is not that asset where investors can get the benefits of their investment without having to sell it. Hence, from an investment point of view, it is surely not a great option.

Why you should avoid buying gold this Akshaya Tritiya?

Traditionally, gold has been viewed as a ‘safe haven’, especially in India. Indians are the biggest consumers of gold due to their big rituals. They invest heavily in jewelry & gold coins. Gold attracts capital gains tax as per the Income Tax Act 1961. However, we can make use of indexation benefits when calculating the capital gains of gold. So the net tax effect shall be too much. Gold does not have any other tax benefits. Moreover, it not only beats inflation, but It also shows poor performance when compared to equity stocks or real estate on the basis of real inflation-adjusted returns. The Price of Gold is normally calculated by jewellers as – Price of Gold * Weight in Grams + Making Charges + GST( 3% Of Price of the jewellery & making charges).

For example- If today market price of gold is Rs.31,000 per 10 grams, making charges 10 % ( our assumption), then this will cost you Rs.34,100 ( which includes Rs 3100 as making charges) plus government taxes (3% of price + making charges). So actually here you have bought pure 10 grams gold having a market value of Rs.31,000 for Rs.35,123

Liquidity in Gold Vs Other Assets

If we compare between liquidity on golds and other assets, it is generally seen as gold more liquidity. Fixed deposits have a lock-in period. People are ready to sell their holdings in any asset when they need to buy something to fulfill their dreams. They are ready to break their FDs, PPFs to get the sum without thinking about the penalty for taking it back before the prescribed period. However, People sell gold just when they are hand to mouth.

Things to remember before buying Gold as an investment

Many people say buying gold is better when the price is at a level between 24K to 26K. They surely say that because they know about the making charges involved in Gold and it actually differs from seller to seller. Further when it is the time to sell gold jewelry, then making charges and taxes incurred are simply not considered or recovered. The charges involved in making charges can begin from Rs 300 per gram onwards. And this may increase to any higher sum depending on the brand and seller of jewellery you buy from.

Moreover, the type of jewellery and the complexity of the jewellery design and fine work are also some of the important factors involved while making Gold jewellery. So, while buying it is essential to know about the calculation right. Thus one must look for things like the weight, making charges and price of stones involved in it. Before buying gold online, one should always check for the website or seller’s return or buyback policy Also make sure you get the bill because it not only helps in cases of return & exchange but also helps in making you confirmed that the quality and purity and weight are not compromised at all.

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