Diwali and Gold

As Diwali arrives, gold once again takes centre stage in Indian households. For generations, buying gold during Dhanteras and Diwali has been considered a symbol of prosperity, purity, and good fortune. It is not just a purchase. It is an emotion, a blessing, and a tradition passed from one generation to another.

But beyond tradition, gold also carries an important financial lesson. Gold is not just jewellery. It is an asset.

Gold During Uncertain Times
Over the years, gold has proved its worth not only during festivals, but also during uncertain times. Whenever the world faces wars, inflation, currency weakness, economic slowdown, or financial panic, investors across the globe look at gold as a safe haven.

This is because gold has a unique quality. It is trusted across countries, cultures, and generations. It does not depend on the promise of one government, one company, or one currency.

Why Gold Holds Value
Unlike paper currency, gold cannot be printed endlessly. Unlike businesses, it does not depend on profits or management quality. Unlike real estate, it is globally accepted and easily valued.

This is why gold continues to remain one of the oldest and most respected stores of value. It has survived centuries of change, economic cycles, wars, and financial crises.

The Right Role in Your Portfolio
That said, gold should not be treated as a shortcut to wealth creation. Equities and equity mutual funds still remain essential for long-term growth. Gold plays a different role.

It brings balance, stability, and protection to your portfolio. When equity markets are volatile or global uncertainty rises, gold can provide comfort, although its prices can fluctuate too. A sensible allocation of around 10–20% to gold, depending on your financial goals and risk appetite, can help diversify your portfolio.

Remember, gold is just a supporting actor. The main actor in your wealth creation movie is stocks and equity mutual funds.

Physical Gold Has Limitations
However, the way you invest in gold matters. Buying physical gold during Diwali may feel emotionally satisfying, but it comes with practical challenges. There are making charges, purity concerns, storage issues, risk of theft, and selling-related deductions.

A necklace may be beautiful, but you cannot easily sell only a small portion of it when you need money. Also, when gold is bought as jewellery, the investor often forgets to calculate the actual return after making charges and deductions.

For investment purposes, Gold ETFs and Gold Mutual Funds can offer more convenient alternatives without the hassles of storing physical gold.

Celebrate Diwali With Financial Clarity
Diwali is a beautiful reminder that prosperity should be welcomed with faith, patience, and financial discipline.  This Diwali, celebrate tradition, welcome Goddess Lakshmi, and upgrade your financial thinking.

(The writer is a Chartered Accountant and CFA (USA). Financial Advisor. Views personal. He could be reached on 9833133605.)