Gold vs. Mutual Funds: Which is the Better Investment Option?

Gold has always been a hot favourite for Indian Investors. So, if you’re in a “should I invest in gold versus mutual funds?” frame of mind, you’re not the first. Many new investors have wondered if gold is a safer investment when compared to mutual funds. Mostly because gold seems like a safe investment it is a real asset since man-made money and many currencies are backed by the country’s gold reserves. On the other hand, we all know that mutual fund investments are subject to market risks (though we have never read the red herring prospectus carefully).

That is why in this piece we’ll try to settle the gold versus mutual fund debate for you. We’ll also look at how gold as an asset compares to most mutual funds. So, lets mutually dig the gold out by separating facts from fiction. To be fair, we’ll list down benefits of both asset classes and then delve into their cons.

Benefits of Investing in Gold

Gold may not give exponentially high results but it’s value rarely degrades. Which is why it’s considered a safe investment by most investors. It is also a physical asset that you can turn into gold jewellery, gold coins, gold biscuits etc. You can test its purity and its value is globally accepted. Gold is, therefore, a really good store of value. It is also an asset that offers easy liquidity in case of emergencies.

Benefits of Investing in Mutual Funds

Mutual funds spread your investments across several market assets thereby reducing the risk involved. They offer you the flexibility of investing in equity, debt across industries and countries. Mutual Funds are managed by financial experts whose sole motivation is to get higher returns for their investors. Mutual funds as a whole have always beaten inflation. If you invest wisely you can get extremely high returns. Learn about Cube Wealth’s brilliant U.S Equities

Drawbacks of Investing in Gold

Like all assets, gold has its own drawbacks. It raises logistics, security and storage concerns. You alone are responsible for managing and securing your gold – which is a pain for most investors. You also have to live with the fear of theft and robbery unless you invest in a Gold ETF. Besides this when sold in the form of jewellery gold involves making charges over and above it’s the actual value. However, while selling gold jewellery you will invariably lose some value as it is very delicate.

Drawbacks of Investing in Mutual Funds

Like Gold, Mutual Funds also have their own drawbacks. Let’s start with the obvious fact that Mutual Funds are not physical assets that have inherent value. Moreover, Mutual Funds don’t always offer high liquidity. The risk involved can be higher if you choose the wrong allocation in your asset portfolio. This is why is it important to always consult a wealth management expert.

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Gold vs Mutual Funds

Now that we know the basics lets do a face to face comparison of the two assets. Mutual funds are a clear winner if you’re looking to build wealth. Especially when you take into account the ease offered by systematic investment plans. You can invest as little as Rs.500 and increase or decrease the amount basis of your financial comfort. Gold, on the other hand, is a great store or value so keeping a small part of your savings as gold isn’t a bad idea. However, when wealth creation bis the goal, then gold falls flat on its face compared to mutual funds. Mutual Funds simply offer a wide variety of variations, permutations and combinations to suit your financial needs. At the end of the day, you’re much more likely to become rich thanks to your mutual fund investments than you are

 

GOLD

MUTUAL FUNDS

Low Returns

Medium to High Returns

High Liquidity

Low Liquidity

Fear Of Theft

No Fear Of Theft

Storage Issues

No Storage Issues

Can Be Used As A Commodity

Cannot Be Used As A Commodity

Delicate & Easy To Lose

No Such Issues

Low-Risk Investment

Varies from low to high depending on the mutual fund

Good Store Of Value

Good For Wealth Creation

Good To Supplement Other Investments

Good irrespective of other investments

  

Should You Invest in Gold or Mutual Funds?

If you’re considering gold as an investment along with side mutual funds, stocks, bonds etcetera, then it makes sense. Otherwise, you’re better off investing is something else. Even a fixed deposit is a better investment in the short term as you know exactly how much wealth you will gain from interest.

How to Invest in Mutual Funds?

If you want to invest in mutual funds you should consult a Cube Wealth Coach before you put your hard-earned money at risk. A Cube Wealth Expert will be able to help you understand your goals and the path to investment success.

FAQs - Frequently Asked Questions

What are gold mutual investment funds?

There are certain funds that invest in gold or related sectors. These can be used to indirectly invest in gold.

Who invests in gold?

Many people invest in gold as a tertiary investment Avenue. Besides this, new investors who do not understand the financial markets tend to lean towards gold as an investment.

Is gold a good long term investment option?

Gold is a good store of value however as an investment it does not offer very high returns.

Are mutual funds a good long-term investment option?

Yes, long term investment in mutual funds is a great way of growing wealth.

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We know it’s a big decision to start investing, to change advisors or to try new investment options. That’s why we give you the option of a free personal phone consultation.

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