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Gold vs Mutual Funds: Where Should Your Money Go?

By Aayush Upadhyay

1st Apr 2022

3 mins read

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Who doesn’t want money? But the game of wealth creation is not the easiest one to play. There is a need to make intelligent decisions every step of the way.

Gold and Mutual Funds, for instance. Which one should you choose? And when? Both are stable assets; both grow your wealth in the long run.

Let us explore what is an intelligent choice for you in this blog.


Gold has been a hot investment choice for generations, primarily through physical jewelry, but now there are many alternatives. Digital Gold, Gold ETFs, Gold Bonds, and so on. Because of its long-term wealth creation, gold was always thought to be an investment for future generations. Gold is a brilliant hedge against market volatility, which is why investors prefer to invest a portion of their portfolio in Gold.

Mutual Funds

Mutual Funds are pools of money managed by professionals. These pools are invested in stocks, bonds, and other assets. Mutual Funds have grown in popularity in recent years due to the benefits of diversification across various segments, management expertise, a wide range of options for every risk profile and most importantly, the long term benefit of compounding.  Mutual funds are best suited for inexperienced investors and those who do not have the time to invest.

Here are the considerable differences between both:

Gold Mutual Funds
Risk Profile Is a low-Risk asset, as it tends to retain its value despite market fluctuations Mutual Funds are comparatively riskier, as they are investing directly into Stock Market, Bond Market, etc.
Return on Investment Have provided a 9-10% yearly return over the past 30 years Different Mutual funds offer different returns, but the Index yearly returns are 10-12%, which most mutual funds outperform.
Liquidity It’s a very liquid asset, be it physical gold(jewelry stores), digital gold(24x7), or even Gold ETFs(Trading Hours) These are also highly liquid and can be quickly sold.
Tax Benefits Investing in Gold Bonds and other schemes can provide tax benefits. Investing in certain Tax-Saving funds can help you save taxes up to Rs46,000 per year.
Options Multiple options are available such as Physical Gold, Digital Gold, Gold ETFs, sovereign Gold Bonds, etc. There are even more options here, from investing in Stocks, Bonds, a mix of both, etc. Mutual funds also allow you to invest in specific industries or markets like Banking, IT, NIFTY, S&P500, etc.
Compounding Gold doesn’t get affected by compounding, as all the growth in the price. Mutual funds are the best way to see your investment compound, as the value of the fund unit increases with time.
Management Gold investing is solely dependent on the Investor's choices. Provide you with the best experts in the field, and they manage your money.
Initial Investment Amount Physical Gold costs a lot, to begin with, but the other options allow you to start with as little as Rs 100 Mutual Funds will enable you to create a SIP for as low as Rs100 and also allow lumpsum investments beginning from Rs 5,000

Needless to say, you know your goals and risk-appetite the best. However, we hope that this blog gives you a clear picture of what’s what. Diversifying your investments will always be a safe and wise decision, and both Gold and Mutual Funds are great options for you to do so.

Oh, and also, If you want automation in your diversification strategies, let Spenny help you. Every time you spend money online, we invest some of it in Gold or Mutual Funds.


What is the Sovereign Gold Bond?

SGBs are bonds that carry a sovereign guarantee that your money will be repaid. The difference here is that you do not purchase or hold gold. Because there is no physical gold, there are no risks or costs associated with storage. As an investor, you will receive the market value of gold at the time of maturity. You also get assured returns of 2.5% p.a. that are paid semi-annually. And the icing on the cake is that you do not need to pay any tax when you redeem your SGB after eight years. The Reserve Bank of India issues these bonds.

What are tax-saving funds?

These mutual funds are known as ELSS Funds (Equity Linked Savings Scheme), which help you invest your money in Stocks and have a three year lock-in period. By investing in ELSS funds, you can get up to Rs 1,50,000 in deductions from your Total Income (as per Section 80C), which can effectively save almost Rs 46,800 every year.

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Made with ❤️ in India