Buying gold this Akshaya Tritiya? What you must know: Investment-mantra in rediff

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Here are some significant facts about Akshaya Tritiya and options available to buy gold.

The day of Akshaya Tritiya in India has been traditionally considered very auspicious for purchasing gold, silver, ornaments, precious stones, real estate and other long-term assets.

What is Akshaya Tritiya?

The word "Akshaya" means the never diminishing in Sanskrit and the day is believed to bring good luck and success. It is believed that if you do charity on this day you will be blessed.

The day is considered auspicious for starting new ventures.

The legend is that any venture initiated on the auspicious day of Akshaya Tritiya continues to grow and bring prosperity. Hence, new ventures, like starting a business, construction etc. is initiated on Akshaya Tritiya.

Why gold on Akshaya Tritiya?

Buying gold is a popular activity on Akshaya Tritiya, as it is the ultimate symbol of wealth and prosperity. Gold and gold jewellery bought and worn on this day signifies never diminishing good fortune.

Exciting offers on Akshaya Tritiya

Gold prices have increased by 32.07 per cent since last Akshaya Tritiya on May 6, 2011. Hence, consumers consider gold a safe investment avenue for higher and secured returns against all other asset classes.

Anticipating a dip in gold sales in volume terms, precious metal and jewellery retailers have come out with exciting offers for Akshaya Tritiya, the most auspicious day to invest in the world's safest avenue as a hedge against inflation.

In addition, almost all banks have been offering rewards and offers for customers to buy gold from them.

Buy gold but don't overdo it

Gold should be an integral part of any asset allocation today forming 10 to 15 per cent of the overall portfolio. As an asset class, it helps diversify the portfolio and given its low or negative co-relation with other asset classes (stocks, bonds etc), it serves the purpose of mitigating risk in the portfolio quite well.

Apart from being a portfolio diversifier, gold is also considered a hedge against inflation. Having said that, make sure you don't over-invest in gold and keep it to recommended levels in your portfolio.

Should you buy gold on Akshaya Tritiya?

For most of us, Akshaya Tritiya is the best day to buy gold. What kind of gold you are buying is also significant here.

Before venturing to buy Gold on Akshaya tritiya, it is always recommended to go through the various options involved in buying gold. Do compare the various investments in gold in India.

Buying paper gold is a more tax-efficient and cheaper alternative to purchasing physical gold.

Though jewellers and banks offer discounts on gold jewellery and coins/bars, as buying gold on this day is considered auspicious by Indian tradition, for an investor, physical gold is not the only option. In the last few years, gold exchange-traded funds (ETFs) have also done well.

ETFs are also cheaper.

Since gold coins and bars have to be moulded to a particular size and shape, jewellers charge a making cost of seven to 21 per cent over and above the price of gold. Add to that, for storing your physical gold in lockers, depending on the institutions, the charge can be between Rs 500 and Rs 20,000.

One can save on these overhead costs while investing in paper gold, as the units are electronically held.

Gold ETFs are a cheaper proposition, as there is no entry or exit load on it. But there is a brokerage. E-gold units, where one unit is equal to one gram of gold, is bought and sold via the spot exchange just like shares, making it a very liquid option to invest in.

Whereas, while selling physical gold to your local jeweller, he will always buy it from you at a price lower than the price prevailing on that day. Also, there is no uniformity in gold prices, as it varies depending on the state that you are selling or buying it in.

Investing in paper gold is tax-efficient.

This is because one doesn't need to pay value-added tax or wealth tax on it, unlike in the case of physical gold.

In physical gold, one gets the benefit of long-term capital gains tax after three years, whereas in gold ETFs, you get it just after a year. You will get indexation benefits, as these are taxed like debt funds.

So while buying gold on Akshaya Tritiya, do evaluate all the available options before opting for the most suitable one and add the yellow metal to your portfolio to make it truly diversified.