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  25 Mar 2021  Gold is a dumb investment - Siby Varghese

Gold is a dumb investment - Siby Varghese

Published : Mar 25, 2021, 10:42 pm IST
Updated : Mar 25, 2021, 10:42 pm IST

Unlike shares or bonds or deposits, the money that you invest in gold does not lead to any kind of economic prosperity says Siby Varghese

Siby Varghese a successful entrepreneur, portfolio manager, and wealth consultant.
 Siby Varghese a successful entrepreneur, portfolio manager, and wealth consultant.

Unlike shares or bonds or deposits, the money that you invest in gold does not lead to any kind of economic prosperity says Siby Varghese a successful entrepreneur, portfolio manager, and wealth consultant.

He proceeds to prosper as a young tycoon in this financial industry, as the wheel of fortune swings in his favour. He is recognised today as the leading entrepreneur and expert in this business sector. To assist novice students to get into the stream, his experience encouraged him to publish guide books related to this business segment.


Siby Varghese shares his experience as an expert on this extremely competitive business segment and illustrates why gold is a dumb investment in today's world.

Gold is tangible and has a strong track record. For centuries, cultures have embraced the shiny metal… but in the modern world, gold is a bad investment, here are 5 reasons why!

You Don’t Know Exactly How To Value It.

"The value of a firm can be determined based on predictions of future profits and the progression of profitability. Gold does not have investment returns and if you want to keep physical gold there is probably a cost to keep and preserve it. Gold is valued what people want to pay for it on that same day," Siby explains.


"The valuation of gold is set by the market, which is very tough to anticipate. Demand typically keeps rising based on fear and not fundamentals."
You can't place a dollar figure precisely on an index of fear, can you?

Gold Portfolios Are Not Cash-Throwing.

Gold, like cash, offers no dividends or interest.  For those seeking a return, that alone could make it suspect. The worst is that the cost of owning gold is an opportunity, namely the foregoing interest which you would have otherwise produced from an alternative investment.

Proper safekeeping requires storage charges, including insurance, to make matters worse. These costs are not avoided by the purchasing of gold by an ETF, since the ETFs assess an annual fee, normally of 0.4% per annum, for these and other expenditures.


Gold Does Have No Real Utility.

All right, so the iconic precious metal doesn't throw off cash. And neither does it have any utility in the manner of output value, others argue.
In this respect, the popular soft metal loses out to other metals such as silver, mostly found in items ranging from electronics to medical instruments to solar panels. Gold, on the opposite hand, doesn't have many end-uses for industrial use.

Gold Will Be Inefficient.

Since it is a tangible commodity individual tend to stockpile, there are storage expenses, and also safety expenses as miscreants tend to rob it.
And the very metal that is meant to shield consumers from runaway inflation and a print-happy Federal Reserve is now continually seeing a rise in production in an ironic twist. After all, more and more are extracted every year, increasing the world's supply of available gold. And then the whole tax issue is there.


No Long Term Return.

The returns appear to be worse than most comparable risk and uncertainty portfolios, and this is still going to be the case. The explanation is that gold generates nothing or provides some profit. Any growth in its worth is based on the conviction that someone else will pay more for it when the time comes to sell. The capital that you spend on gold does not lead to economic development, unlike shares or bonds or bank deposits. Capital would be generated from the same amount of investment invested in a profitable enterprise or some other profitable economic activity. A provided quantity of gold, however, will forever remain the same.


Bottom Line

Siby Varghese, an award-winning portfolio manager & a developer of highly profitable patented trading strategies, says gold is just not enticing as an investment. "Purchasing gold for future consumption, not as an investment, is what I suggest to my clients," says Siby. He advises that they allocate no over 5-6 per cent of their investments to those clients who just want to invest in gold for diversification.

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So, only have a small portion of your investment portfolio in gold and that too just for sake of diversification. Assemble your portfolio with systematic investment plans and fixed income products of good quality equity mutual funds instead. They not only serve you great returns, you also get the advantage of compounding. Some of these product lines also offer greater returns post-tax as well.


Disclaimer: No Asian Age journalist was involved in creating this content. The group also takes no responsibility for this content.

Tags: siby varghese, gold investment, wealth consultant, investment portfolio, investments