Why Is Gifting Shares Instead Of Gold A Better Idea?

In India, gold is considered an auspicious gift. It is a common belief that gifting gold means sharing prosperity. It is quite common to gift a modest quantity of gold at Indian weddings. Have you ever thought of gifting a portfolio of stocks to your loved ones? Shares can be a great gift over gold in the long term. Practically, shares score more as a better gifting option than gold for many reasons.

Let’s look at the various benefits to understand why gifting shares is a better idea by weighing both shares and gold on various factors:

• Growth and Performance

Equity as an asset class has historically performed well over the long term compared to other asset classes, including gold. The below comparison graph gives you the historical comparison of various asset classes, and you can see stocks at the top. Shares have the potential to deliver higher returns and can help you build significant wealth over the long term. Equities are known to deliver inflation-beating returns over the long run under favorable market conditions. The yellow metal also appreciates by value over the period, and it is mainly used as a hedge against inflation. However, gold in smaller quantities does not hold value over a period. Hence, by gifting shares, you can secure the financial future of your loved ones.

• Liquidity

Equity is considered one of the best choices when it comes to choosing an asset class with the highest wealth creation ability. In comparison to gold, stocks offer liquidity. You can liquidate the stocks by selling all or part of them when you need them. When gifted as ornaments and coins, gold is highly illiquid, which can also pose storage and security issues. However, other gold investments can offer you liquidity but cannot give you good growth when exited in need.

• Income

Shares can pay you dividends from time to time which can be a good amount of income. Unlike shares, gold has no such option to offer you additional income. Hence, shares can be a better gift that would keep on giving extra income in the form of a dividend.

• Tax Efficiency

When it comes to efficiency in terms of tax, gifting equity shares to your loved ones or relatives is completely tax-free irrespective of the value. Transferring shares for gifting would transfer the ownership to your loved one, and the person can get all the benefits of the investment. However, gold received from you becomes taxable for your loved one if the value exceeds INR 50,000.

Equity beats gold in performance over the long term is the universal truth. Hence, make a meaningful gifting choice. Instead of gifting an auspicious yellow metal, consider gifting a portfolio of good stocks that are fundamentally strong and have a great potential to grow in the future. Let your gift be creative and enlighten your loved ones and people known to you with the newer growth investment opportunities.