Akshaya Tritiya And The Significance Of Investing In Gold: Financial Planning And Wealth Management

Akshaya Tritiya, is one of the most auspicious days for Indians across the globe. This day signifies beginning of prosperity which is never ending, and to honor its sacredness, there is no better way than to mark it by buying the precious yellow metal.

According to lunar calendar, its the third lunar day of the spring month of Vaisakha. As per Sanskrit, the word 'Akshaya' means "never decreasing" in the sense of "prosperity, hope, joy, success", while 'Tritiya' means "third phase of the moon".

Gold has been a part of Indian households since ancient times, for it is symbolic of wealth and as a part of adornments in form of jwellery. However its significance is beyond the purview of mere wealth.

Here are few reasons that show gold's significance and why it is a suitable asset for investment

1. Highly liquid asset
Gold is one of the most effective asset that can be easily liquefied. If you have bought physical gold, you can sell it off at the nearby gold vendor. Likewise if you have bought gold in non- physical form (exchange traded fund, or gold fund) you can redeem your units easily as when required, and you do not have to worry about its storage as well.

2. Acts as hedge and safe haven
It helps to deal with systemic risk, during stressful times. Gold as an asset has a negative correlation with other assets during risk-off periods, protecting the investors' capital against tail risks, and other events that have an adverse impact on capital or wealth. This safety of cap is not present in other commodities or assets also.

3. Outperforms in low inflation periods
Gold has a tendency to move up with the increase in the cost of living of individual and it serves as a cash reserves. Even the central banks across the globe increases or decreases its hoarding to deal with the inflation.

4. Gold has lower risk compared to equity investment
Gold as an asset class is negatively correlated to equity and other investment options and less volatile than equity. It is not risk free, but its major risk, if investing in physical gold is getting stolen, along with the gold price movement.

The gold price moves lower in the time you hold the gold, known as market risk. However it becomes less likely over the medium term, as any market volatility is ironed out. While if you buy non-physical gold, there are further risks such as possible leveraging of the asset and counterparty risk.

5. An effective diversifier in the portfolio
Adding gold to the portfolio is helpful, as it will react differently compared to other assets at any given point in time to a particular event or announcement. So when the equity underperforms, gold will give superior returns. For the month of March the price of 22 carat and 24 carat gold per 10 gram in India was up by nearly 6.59%.

6. Gold does not degrade over time, unlike several traditional commodities
The value of gold appreciates over time and can deliver better long-term, risk-adjusted returns. If you had invested in 10 grams of gold in last one year you would had earned roughly 12. 22%, and in 6 months you would have fetched a profit of nearly 20.51%.

7. Rupee depreciation sees rise in in gold prices
When rupee depreciates in global markets, the rising dollar guides gold prices to appreciate.

Conclusion
Investment in gold has been prevalent in India since ancient times, which still has importance even today of being symbolic of wealth that carries immense value. Remember gold offers an effective hedge during global uncertainty and a shield against inflation. Most importantly in your portfolio, it serves as a diversifier and also acts a safe haven during any market collapse.