Gold purchase is considered an auspicious affair on Diwali in India. Families plan year long to save money to buy gold coins, bars or jewellery, hoping to accumulate the precious metal. Historically known for its financial benefits, it is believed that buying gold on Dhanteras brings prosperity and wisdom.
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Recently, gold's historic rally has also given investors the confidence to make the precious metal a key part of their portfolio. From around Rs 26,000 per 10 grams of 24-karat gold in 2015 to now above Rs 1,30,000 per 10 gram, the precious metal has rewarded its long-term loyalists significantly. Financial experts note that its fundamentals continue to look strong, which means that despite its massive rally so far, gold still has potential to generate wealth.
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Imagine putting Rs 25,000 every year into gold on Dhanteras. You may think that with the precious metal becoming more expensive, your investment may not yield a lot of returns. However, historically, gold has been giving an average 10% returns. This places it above products like bank fixed deposits and ideal for long-term investment.
Rs 25,000 gold investment for 10 years:
- Gold investment: Rs 25,000
- Investment duration: 10 years
- Expected rate of return: 10%
- Invested amount: Rs 2,50,000
- Estimated returns: Rs 1,88,279
- Total value: Rs 4,38,279
If you keep investing for longer durations, your gold investment can compound even more meaningfully.
Over 15 years: Rs 3,75,000 investment becomes Rs 8.73 lakh.
Over 20 years: Rs 5 lakh investment becomes Rs 15.75 lakh.
Over 25 years: Your Rs 6.25 lakh investment becomes Rs 27 lakh.
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This shows that over the long term, even a modest annual investment into gold can create significant wealth for investors. Ideally, it is recommended to have at least 10% of your portfolio as gold. However, the exact allocation should depend on your risk appetite, time horizon and financial goal. Since gold does not offer regular income, it should be seen as separate from cash-flow generating assets. The above calculation is based on the assumption of average returns of 10%. The actual returns may vary depending on the movement in the precious metal.
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