Gold vs. Mutual Funds: Which is the Better Investment Option?
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.
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). You can consult a Cube Wealth Coach or download the Cube Wealth App.
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 investm
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). You can consult a Cube Wealth Coach or download the Cube Wealth App.
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.
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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. You can consult a Cube Wealth Coach or download the Cube Wealth App.
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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 due to your gold investments.
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
Q. 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.
Q. 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.
Q. 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.
Q. Are mutual funds a good long-term investment option?
Yes, long term investment in mutual funds is a great way of growing wealth. You can consult a Cube Wealth Coach or download the Cube Wealth App.
Conclusion
Ultimately, the decision between gold and mutual funds should align with your financial objectives and risk tolerance. Diversification can also play a significant role in constructing a well-balanced portfolio. It may be wise to consult a financial advisor or conduct thorough research before making a final decision to ensure that your investment strategy matches your unique circumstances and goals.
Rishabh P Nair is the Head Of Brand Content at Cube Wealth, the Financial Freedom App with a smart Perfect Portfolio Planner. Rishabh has been weaving stories for over 10 years and prides himself on building brands with a strong identity.
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