Choosing one over the other as the clear winner could be a mistake. Selecting whether to invest in gold or in mutual funds depends on many factors such as the risk appetite of the investor, goal of investment, investment amount at disposal, etc.
Gold has always been a safe haven for investment. However, gold investment in India is different from other countries as usually buying gold is sentimental rather than an investing activity for Indians. In India, gold is considered a passive investment, which is kept as an asset for bad times.
Over the last couple of years, gold has registered a significant growth rate compared to asset other asset classes. However, recently, even gold prices have declined in the market.
Comparatively, industry experts say, mutual funds have again come up the charts as one of the preferred investment options. Mutual funds distribute the investment over a wide spectrum of industries, and hence, risks are mitigated. Simply put, an MF does not put all its eggs in one basket. Usually, it is suggested to make investments in MFs through SIP. To earn substantial returns, equity MF is the way to go, having a long time horizon of 10 to 15 years.
Investing via SIPs in equity mutual funds allows an investor to accumulate wealth over 10+ years. With MF investment even though the risk remains high, as compared to gold, in the long run, the volatility and risk associated with the investment get cut down. Experts say investors who are looking to create wealth, at the same time willing to take a little risk and invest for the long term should invest in MF.
Having said that, unlike gold investments, investments in mutual funds, requires a great deal of planning and knowledge on the investor’s part.
Experts say choosing one over the other as the clear winner could be a mistake. Selecting whether to invest in gold or in mutual funds depends on many factors such as the risk appetite of the investor, goal of investment, investment amount at disposal, etc.
For instance, experts say if an investor’s priority is an emphasis on savings, wherein the investor is looking for ways to protect his/her capital, without focusing on earning high returns, then gold works more in line with that investor’s preference. However, if one wants to create wealth and are looking to earn good returns, then mutual funds are more adept at achieving that financial goal. Hence, the choice between SIP mutual fund and gold depends on the investor’s preferences and priorities.
Both the investment avenues have their own pros and cons. Financial planners say the wise approach for an investor will be to distribute his/her funds proportionately between gold and mutual funds.