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August 17, 2022

The investment choices of Indians are very varied. According to a report from August 2020, Indians own about 25,000 tonnes of gold, the biggest private ownership in India. But India’s love story with gold investments is not new. Gold’s tangibility is one of the top reasons for the same.

At the same time, we now have grown an aptitude for options like mutual funds as well. Several data show the increasing number of mutual fund subscriptions among Indians. But there still exists confusion among the common in choosing between gold and mutual funds. Let us learn more about both and compare them to see which option is better for you. 

Mutual funds

Mutual funds are an investment option where the money you invest is put in a portfolio designed by a fund manager according to the theme of the fund. Different mutual funds will have different focuses. For instance, an aggressive mutual fund may invest more in equities, while a conservative fund may have more debt presence in its portfolio. The choice here should be based on your risk appetite and investment goals. 

Gold investments

As said above, gold is one of the most preferred investment options in India, thanks to its tangibility. Since gold doubles as jewelry and is a part of the culture in many places, it holds sentimental value as well.

As an investment option, too, gold has proved its worth with how its value has increased over the years. But when kept as jewelry, other charges, including charges, could also offset the overall profit. Virtual gold can be a solution to this. 

Mutual funds vs Gold – which is better? 

Let us compare different factors associated with gold and mutual funds as an investment to help you make the choice easier. 

Returns

The returns you get from gold investments depend on the price increase of gold as a commodity. This is dependent on different factors, including supply and demand. If history is taken as a reference, you can see that gold rates have grown between 10 to 13 % annually most of the time.

On the other hand, returns from mutual funds are dependent on the type of fund you invest in. Equity-focused funds normally can give up to 18% returns on average, while for debt funds, the returns are comparable to that of gold investments. Here, it is important to understand that risk increases as the potential increases for mutual funds. 

Gold

The risk associated with investing in gold is considered to be among the lowest. Gold has a proven track record of safeguarding wealth even at times of economic tensions. This is another reason why a lot of people still favour gold investments.

On the other hand, the risk associated with mutual fund investments depends on the type of fund you invest in. For instance, equity funds tend to have a higher risk (and return potential), while debt funds tend to have a comparatively lower risk (comparatively lower return potential). The choices are plenty, and chances are, you will be able to find a fund that is perfectly matching your risk tolerance. 

Liquidity

Gold is considered to be one of the most liquid assets. Due to higher demand, you can easily sell gold. Even digital gold shares the same attributes.

The liquidity of mutual funds often depends on the type of fund. But since most mutual funds are open-ended, they can be sold in stock markets as well.

Both mutual funds and gold investments are beneficial investment options. But the choice between them should be based on your investment goals and risk tolerance. Hence, it is wise to talk to your investment advisor before investing.

Garth Gregory

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