Recently, I was privy to a conversation between a friend and her mother about her wedding.
Here’s how the conversation went:.
Mom: I will buy you jewelry worth Rs. 5 lakhs for your wedding.
My friend: Why?
Mom: What do you mean why? It’s what we give to the daughters of the family on their wedding day.
My friend: But why just gold, why not expensive bags, phones or may be an FD, or even better mutual funds - stuff and money which I might actually use? Instead of jewelry which will stay locked in the bank, the very next day of my wedding!
Mom: A phone or a bag will be of no worth after 2 years. But the value of gold only increases. It is an appreciating “asset”. Once you buy it, you can use it whenever you like, to raise loans against it, or simply to enjoy the higher value…
My friend: Okay Mom, let’s say I need money in the next 2 years and I sell this gold for it - how sure are you that I will get a much higher value than what we bought it for? Besides, what about the high-interest rates at pawn shops?
Mom: Why are you thinking so much? At least you will get the cash when you need it most, in a day’s time.
My friend: I am not over thinking. I am just being practical. If we invested this money in a debt fund, I can withdraw it in a day, or simply raise a request with the bank and still get the money in a day’s time. I don’t have to pay any interest and this money would have compounded in two years.
Mom: But gold is not risky! Your debt funds are, and gold never loses the value it was bought at!
My friend: Debt funds are low-risk instruments too. And their value will compound! Plus, I’d never be scared that my debt funds got stolen from home!
Mom: Why are you so argumentative? Don’t you want to look beautiful on your wedding day? It’s your day to shine!
My friend: I don’t really care about what our relatives think, about the value of my “trousseau”. I would rather have the money in the bank, so that I can withdraw it when I need it. Because Mom, my cost of living will require money. Not gold.