Personal Finance experts and portfolio investors always advocate gold as an investment. They believe that gold is an excellent hedge in times of trouble. In fact, they have been proven right, after a surge in gold prices, following the Lehman Brothers crisis.
Here are 7 reasons why gold can also be a bad investment. Check gold rates in Indian cities here
No regular income
One of the biggest reasons why gold is not an attractive investment is because there is no regular income. Shares give you dividend, while other fixed income securities offer you regular returns. Gold only offers you capital appreciation, if there is an increase in prices.
Capital gains tax
If you sell your gold at a profit, whether it is gold ETF or physical gold, you would be liable to pay a capital gains tax of 20 per cent, with indexation and if held for long term. Long term here is defined as a holding period of 36 months or more.
If the profit arises before a period of 36 months, redemption amount would be taxed as per your tax slab.
Margins squeeze out profits
When you buy and sell gold, the difference and the margins are just not lucrative. If you buy and sell on the same day, you will realize, that the buy and sell quote is too wide. This is not the case with other investments like shares, where brokers operate on very thin margins.
Costs involving storage
When you buy gold and jewellery in the physical form, you have to worry over its storage. The costs of storage is another reason, why gold is not a good proposition.
Theft - a major issue
Apart from this, the other worry for gold is that you have a problem with theft. This is of course, unless you store the same in a bank locker or another place, where it is relatively safe.
Govt policies make prices volatile
There is just too much risk, when it comes to government policies. Any change in import duties and other measures, tends to lead to price volatility of the precious metal.