Gold on Dhanteras: celebrate the ritual, rethink the investment

Summary

There is nothing wrong with the ritual. Just don’t mistake it for investing.

Every year during the Diwali season, as Dhanteras comes around, people who have never bothered to invest in a planned way step out to buy gold on the same day. Jewellers stay open late, queues form at shop entrances, and almost the entire nation performs in unison what many believe is an act of investment.

I’ll be careful here, because this column is about money, not culture. The Diwali season is wonderful, and Dhanteras is one of its best parts. The lamps, the cleaning of homes, the sense of a fresh beginning, the gathering of families. None of this needs improving, least of all by me. If your family welcomes prosperity by buying a little gold, buy it with all your heart. The ritual is not the problem. The problem begins when we mistake the ritual for a financial decision.

Look at what is actually bought that day. For most families, it is jewellery, bought with a hefty markup in the form of ‘making charges’ that vanish into thin air as soon as you leave the shop, or coins that spend years in a bank locker that costs money to rent. Whatever else this activity may be, it will not build wealth. It is consumption, often very enjoyable consumption, but it does not become investment simply because the day is auspicious.

So examine the behaviour itself. No other investment is made this way. No one wakes up on a specific day to buy mutual funds or stocks. Yet, with gold, crores of people buy on a particular date. Tell someone you plan to buy a stock on a specific day because it is auspicious, and they will tell you that you are not investing at all. The festival simply hides this absurdity under a warm glow, making behaviour we would laugh at anywhere else feel acceptable.

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