Mutual Fund vs. Gold - What is a Better Investment?

There was a time when gold was considered as one of the best investment options. People used to keep ornaments to gift their loved ones or saving for their child's marriage. Today, things have certainly changed with the passing years.There is a shift in the investment pattern due to the emergence of fund types like sovereign bonds or digital gold. In such a situation, it is prudent for an investor to wonder if a particular asset is better than the other what you should choose when it comes to mutual fund vs. gold. Note that mutual funds and gold's returns and risks vary, and these are available in different types.

• Physical gold biscuits are available for 10 grams, and their price fluctuates in the stock exchange as per the demand and supply in the market.
• Gold ETFs can be held in electronic form. It acts just like a bank account. If you're holding 1 unit of gold, which is equivalent to 1 gram of gold, you can sell the unit, and the amount gets credited into your bank account.

• Debt Funds: Investors with a low-risk tolerance can opt for debt mutual funds and get returns at the rate of 7% to 10%.
• Midcap funds: These are moderate risk mutual funds that offer returns at the rate of 15% to 20%.
• Large cap funds: Just like multi-cap funds, this type of mutual fund poses a moderate risk. It offers in the range of 12% to 18%.
• Small cap: Investors looking for high returns can choose to buy stocks of small cap companies. These stocks offer returns in the range of 15% to 20%.
• Balanced funds: Also known as hybrid funds , it invests in both equity and debt mutual funds. The risk and returns are dependent on the type of fund – equity-oriented or debt-oriented hybrid fund.

As compared to gold, a mutual fund is considered a safer option and offers better liquidity. One of the drawbacks of redeeming units is the returns can be taxed, which is not the case if you're investing in gold. Besides, mutual funds yield better returns; hence it is preferred by a lot of professional investors.

Gold can be purchased in any form. They are available in different carats and sizes. It is easy to buy from any shop, or you can also avail of it from digital platforms. Unlike mutual funds where research is required the most, you need to do minimal checks on the jeweller’s
authenticity.

When it comes to choosing between the two, your decision shouldn't be based on returns. It is necessary to review your objectives and goals before making a final decision.

The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.