Investment in Gold vs Investment in Mutual Funds

Gold has always been the safe haven of investment. In the last 5 years, no asset other than gold has registered a significant growth rate. But recently, even gold witnessed a fumble in the market. The pace at which the price of gold has stumbled down during the last 6 – 7 months, has turned the whole market skeptical about the sanctity of this ever shining investment.

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As a result, mutual funds^^ has again come up the charts as a preferred investment. Mutual funds mitigate risks by distributing the investment along a wide of spectrum of industries. Put simply, it works on the wisdom of not putting all your eggs in one basket. But making an investment in mutual funds, unlike gold investment, requires a great deal of planning and vigilance on the investor's part.

Let's get on to the 'Gold investment vs Mutual Fund' debate and try to delineate which of the two is a better avenue for making an investment.

Gold investment   Mutual Funds
Definition Gold is a precious metal that has always been highly valued in the market and works as good as the paper money Mutual Fund is a complex financial product that works by investing the investor's funds in equities, debts and other money market instruments
Category Gold investment is an investment asset as well as a functional commodity Mutual fund is a pure form of investment
Management The investment is made and managed at the sole discretion of the investor The investment is professionally managed by money market experts
Strategy Investment can be divided into physical gold and gold ETFs but that is, more or less, the same thing. There's no diversification involved. Mutual funds involve diversification of portfolio through investing in a variety of securities
Risk Involved Storing and carrying around gold involves risk of theft and burglary. However, there's no such risk in gold ETFs No such risk is involved in mutual funds. As a matter of fact, mutual funds can be bought and sold online
Trading Buying and selling gold involves
  • no charges

  • no intermediary

  • no documentation

BuBuying and selling mutual funds 
  • involves intermediary

  • incurs entry and exit charges

  • requires documentation

Returns Gold does not encash the highs of the market. It doesn't earn anything and doesn't pay any dividends. Mutual fund ride both the bull and bear to yield substantial returns to the investor.
Variants Gold is gold there are no types to it, except for the quality parameter, implying that 24K gold is always costlier than 22K gold Mutual Funds have many variants to it based on the kind of funds. So it becomes very important that you go for a right mutual fund suiting your investment appetite
Liquidity Gold is an asset with a high liquidity. It is can be traded with anyone anywhere Mutual funds are quite liquid as well, enabling you to cash your funds at the current Net Asset Value. However, they are saleable only in a specific segment of the market. You can't sell it to anyone anywhere
Investment Cost At a whopping price of 26,320 per 10 gms, (as on the date this article was published) one needs to think twice before investing in it. Even, the minimum investment that has to be made to start with is quite high. Investing in mutual funds is quite affordable and flexible. The amount you want to invest depends on the number of units you can afford to purchase. The minimum investment can start from as low as Rs 1000
Market Knowledge There's no need to be vigilant while investing in gold. Even a not-so-smart investor is able to get substantial returns, provided he/she invests it for a long term Investing in a mutual fund needs you to be on your toes all the time. Only a smart investor with a know-how of money market can make his/her way to profit through mutual fund
Stability Gold is not resistant to the market fluctuations. But, no matter, how bad it might look, it's value tends to always go up in the long run. Mutual fund is a highly dynamic financial product that keeps on riding the lows and highs of market and thus is nowhere near to be called as stable investment avenue


The Verdict

It would be a mistake if we declare any one of them as the clear winner. The decision whether to invest in gold or mutual fund depends on many factors such as the goal of investment, risk appetite, investment amount at disposal and so forth. A wise approach is to distribute your funds proportionately between gold and mutual funds.

Past 10 Year annualised returns as on 01-02-2024

^Tax benefit are for Investments made up to Rs.2.5 L/ yr and are subject to change as per tax laws.

*All savings are provided by the insurer as per the IRDAI approved insurance plan.

Tax benefit is subject to changes in tax laws. Standard T&C Apply
~Source - Google Review Rating available on:-

^^The information relating to mutual funds presented in this article is for educational purpose only and is not meant for sale. Investment is subject to market risks and the risk is borne by the investor. Please consult your financial advisor before planning your investments.

#The lumpsum benefit is calculated if policyholder invested ₹10000 monthly for 10 years in the fund with a policy term of 20 years. This Point To Point past performance data of last 10 years has been used to illustrate a scenario for the customers benefit. It is assumed that the past 10 years returns would have also been delivered in last 20 years. This is not guaranteed and not in anyway indicative of what the customer may actually get 20 years from now. The investment is subject to market risk and the risk is borne by the policyholder.

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