I want to invest some amount in gold or mutual fund. What is the better investment for the long term?Asked
Looking at the current market scenario, it has been observed that the usual higher returns which were obtained by investment in gold have started declining.
People have started moving towards the investment in mutual funds because of several reasons, some of which are listed below:
In opposition to this, there are some benefits associated with gold investments also, which include:
Based on these pros and cons, you may decide the kind of investment which better suits your profile. For more clarity on these two different investments, read more.
Investing in mutual funds or investing in Gold will definitely help to get good amount of returns, but in order to look for long term returns we should have a look at the returns offered by both instruments over a period of time.Considering the information from 2017
As seen from the above table, for 1, 3 and 5 year return Equity Mutual funds provide better returns compared to gold but for 10 year returns, Gold beats mutual funds for returns.
Apart from returns various other factors are also considered like safety and liquidity. Mutual funds as compared to gold are much safer and also liquidity is almost same in both the cases. The only difference is that while withdrawing money from mutual funds before defined period, the amount can be taxed which is not the case of gold. So based on all these factors and also the risk appetite of investor, the decision should be taken.
Mutual Funds and Gold are both completely different things. Returns and risks involved in Gold as well as Mutual Funds vary a lot and also these are available in different variants.
Physical gold is available in physical form with different levels of purity. Physical gold biscuits are available for 10 grams and in multiples of that. Moreover it also has cultural significance. The price of Gold keeps on fluctuating in the stock exchange as per demand and supply in the market. Returns in case of Gold is very minimal.
Gold ETF is also available, which has 99.5% purity. They are held in electronic form, very similar to holding of shares. It acts just like a bank account where balance is there in the account, but money is not held physically. When you want the money from your bank you withdraw the same. Similar is the case with Gold ETFs. If a person is holding 1 unit which is equivalent to 1 gram of gold, then he can sell that unit and the mount will get credit to his account. A demat account is needed for a person willing to trade in gold ETF. In the case of physical gold, physically holds the gold.
In case of Mutual Funds, various options are there for an investor depending on the risk he is willing to take.
Following are the different funds :
· Debt Funds - This fund invest in debts and the risk involved here is very less. Investing in these funds is suggested for first time investors and aged people. Also people willing to take less risk and get a return of 7-10%.
· Large Cap Funds- Here the investment is made in large cap companies. These companies offer 12-18% return. Moderate risk is involved and it is suggested to invest here for 3 years or more.
· Mid Cap Funds - Here the investment is made in mid cap companies. These companies are offer 15-20% return. Moderately high risk is involved and it is suggested to invest here for 3 years or more.
· Small Cap Funds - Here the investment is made in small cap companies. These companies offer 15-20% return. High risk is involved and it is suggested to invest here for 3 years or more.
· Balanced Funds - This fund is a combination of equity and debt in its portfolio. Depending on the proportion of investment made in Equity and Debt, the risk and returns are accordingly determined.
Investment in case of mutual funds can be done via SIP or lumpsum as per availability of funds. Moreover investing in Mutual Funds is preferred by professional investor as they yield much better returns as compared to Gold.