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Equities or Gold: What Should an Investor Choose this Diwali?

Diwali’s auspiciousness makes it the ideal time to explore for fresh investment opportunities. Undoubtedly, gold remains a popular traditional investment option, but some investors are eyeing higher returns by putting their money into stocks.

When equities and gold returns are compared, it becomes clear that gold is still the best option for protecting against inflation. This is particularly true when the market is experiencing periods of high inflation or a strengthening dollar.

In the past, stocks have remained remarkably resilient. There have been times when the market crashed and bottomed out, only to recover quite strongly.

The price of 10 grams of 24-karat gold has increased significantly over the last ten years, rising from Rs 29,600 in 2013 to Rs 62,480 at the moment—a noteworthy 111% return.

On the other hand, the benchmark index NSE Nifty has provided over 200% returns in the last decade from 6,299 levels in October 2013 to 19,406.7 at present.

Crucially, the risk associated with investing in stocks is higher than that of gold. So, out of the two asset classes, which one should an investor select for this Diwali?

Read also: FD Vs Gold which investment is better

Experts believe that the outlook for the equity markets is positive as India gets ready for elections in 2024 and there is likely to be a peak in the US interest rate environment.

It is largely anticipated that gold, as well as equities, will perform well in the next few months. In fact, gold may further benefit from the anticipated economic slowdown in the US in 2024. 

Investing in gold instead of stocks also serves as a hedge against an extremely volatile stock market. Gold has demonstrated a Compound Annual Growth Rate (CAGR) return of 7–8% over the past ten years, demonstrating its ability to diversify the risk associated with equity investments.

As an investor, you should be aware that the roles that stocks and gold play as investment instruments in a portfolio vary, and you should consider investing based on your risk tolerance. For instance, if an investor can tolerate a high level of risk, the proportion of stocks should be higher, ideally between 70 and 90 percent, and the remaining amount could be appropriately allocated to gold as a hedge against difficult financial circumstances.

Gold and diamonds are different types of investments. Gold is considered a more stable and liquid investment as it’s a daily traded commodity, while diamonds can be less predictable. The value of a diamond can be influenced by factors like rarity, size, colour and cut, but could also be subject to what’s in demand in the market currently. If you’re looking at a long-term investment, gold would be a safer choice

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