{"id":14267,"date":"2020-02-18T12:35:54","date_gmt":"2020-02-18T07:05:54","guid":{"rendered":"https:\/\/www.moneyworks4me.com\/investmentshastra\/?p=14267"},"modified":"2026-05-13T10:27:14","modified_gmt":"2026-05-13T04:57:14","slug":"why-invest-in-gold","status":"publish","type":"post","link":"https:\/\/www.moneyworks4me.com\/investmentshastra\/why-invest-in-gold\/","title":{"rendered":"Why invest in Gold, how much and where?"},"content":{"rendered":"

Gold occupies a unique position in Indian households. While it is often associated with culture and tradition, the decision to invest in gold should be driven by financial logic rather than emotion.<\/span><\/p>\n

The real question is not whether we value gold, but whether it deserves a place in a long-term portfolio, and if yes, how much.<\/span><\/p>\n

Why Indians Prefer to Invest in Gold<\/b><\/h2>\n

Discovered as shining yellow metal centuries ago, gold has always attracted attention for its rarity and permanence. In India, this attraction goes beyond aesthetics.<\/span><\/p>\n

Across generations, gold has been viewed as a store of value, a symbol of wealth, and a financial fallback during uncertain times. From weddings to inheritance, gold is deeply embedded in financial behaviour.<\/span><\/p>\n

Even households with modest incomes tend to accumulate gold over time. This reflects not just cultural affinity, but also an implicit understanding\u2014gold holds value when other assets may not.<\/span><\/p>\n

However, this emotional inclination must be separated from a rational decision to invest in gold as part of a portfolio.<\/span><\/p>\n

Gold vs Equity: What Recent Returns Indicate<\/b><\/h2>\n

If we look at recent trends, gold and equity have delivered comparable returns over certain periods.<\/span><\/p>\n

Based on the chart above, gold has delivered slightly higher returns than the Nifty over the last decade. This may create the impression that gold is a superior investment.<\/span><\/p>\n

However, this conclusion can be misleading.<\/span><\/p>\n

Over long periods, equities have consistently outperformed gold. Since its inception, the Sensex has delivered significantly higher compounded returns compared to gold prices. The reason is structural, businesses grow earnings and create value, while gold remains a non-productive asset.<\/span><\/p>\n

Short-term outperformance of gold is often linked to macroeconomic stress\u2014such as inflation spikes, currency depreciation, or global uncertainty.<\/span><\/p>\n

This leads to a more balanced conclusion:<\/span><\/p>\n

Equity creates wealth.<\/span>
\n<\/span>Gold preserves it.<\/span><\/p>\n

Now, let us look at returns given by Gold in the past years versus Nifty.<\/strong>\"Gold<\/a><\/p>\n

In the above chart, Gold has given a CAGR of 6.6% whereas Nifty has given a CAGR of 6%. This gives the impression that Gold is a better investment avenue than equity.<\/p>\n

However, it\u2019s a mere coincidence as the long term data suggests that Equity is victorious. Sensex started in 1979.<\/p>\n

If we compare Sensex returns since inception versus the Gold prices, it is a staggering 16% CAGR versus a mere 9% CAGR in Gold.<\/p>\n

This concludes that Equity remains the most profitable investment class.<\/p>\n

Should You Invest in Gold at All?<\/b><\/h2>\n

The answer is not binary.<\/span><\/p>\n

Gold is not meant to maximise returns. It plays a different role in a portfolio. When you invest in gold, you are not chasing growth, you are buying stability.<\/span><\/p>\n

Gold acts as a hedge during:<\/span><\/p>\n