Where Should I Invest in Gold or in Mutual Fund?

Where Should I Invest in Gold or Mutual Funds?

My father is thinking of investing for his 2-year-old daughter and seems a little nervous about whether he should invest in gold or mutual funds because he wants to invest in their daughter’s marriage. Currently, he had 5 lakh rupees in his pocket.

So In this guide, you will find answers to all your questions (regarding where he should invest, at the end how much corpus he will get and many more) and will be able to invest in gold or in the mutual fund or some other option that fulfill his want.

So grab a cup of coffee and read on to your new journey

In this article, we are assuming that the girl will be married in 27 years. See you have a long investment horizon around 25 years, so definitely you will get a huge corpus. But question is that where to invest to get more!

If we look upon Gold, Gold has always been considering the safe investment option. The yellow precious metal has always been viewed as a passive source of investment. People assume that the value of gold would always appreciate in the future and hold on to it, but earn on earn it gives poor returns.

Let’s do a comparison of the last 20 years. In the year 1999 Gold in India cost around Rs 5110 approx, while BSE (Bombay Stock Exchange) Sensex was at the level of 2899 approx. At present, the value of 10-gram gold is Rs 35000 while Sensex is at an all-time high level of 38,000. If we compare these values from the past 15 years as well, gold has appreciated 5.4 times since 2003, while Sensex grew nearly 12 times.

From these facts and figures, it should be cleared that if you are a very conservative type of investor so you should prefer gold rather than Sensex.

However, there is another investment segment that has even brilliantly performed the BSE Sensex – mutual funds.

The Pace, at which the price of gold has fallen during the last 15 years, has turned the whole market distrustful about the sanctity of this ever shining investment. As a result, mutual funds have again come up with the charts as a preferred source of investment.

Now I am explaining what is Mutual Funds for those who do not know what it is if you know what it is, then you can go to the new paragraph, you will not miss any information.

Read: Sukanya Samriddhi Yojana (SSY Account) – Post Office Saving Scheme

What is Mutual Fund? 

mutual fund is that type of investment that uses money from investors to invest in stocks, bonds, or other types of investment. A fund manager (or “portfolio manager”) of your fund decides how to invest the money, and for this, he is paid gets a fee, which comes from the money in the pool of funds.

You should choose your mutual funds based on your risk profile. For example, if you are a conservative type of investor, you should invest mostly in aggressive schemes like large-cap mutual funds( they are stable funds). Moderate type of investors or an investor that have a capacity of taking a little risk can consider investing in multi-cap mutual fund schemes because they are risky as compared to large-cap funds. Aggressive or speculative types of investors can opt. for risky options like mid-cap and small-cap mutual funds, see if you want to get a high return on your investment and want to get more corpus then you have to take the risk.

On average large-cap funds gives 10-14% returns, midcap funds give 15-20% returns, small-cap funds give 20% returns, or even more.

In my opinion, you should invest 40% money in LumpSum, and do a small amount of SIP ( Systematic Investment Plan) every month, so that you can enjoy the effect of compounding.

Facts And Figures

According to The Warren Buffet (the great American investor, philanthropist), I expect that know this man. He said that if you invest 10 lakh rupees in a lump sum and do monthly SIP of rupees 10,000 in index fund after 30 years you will have 100 crore rupees in your corpus, that’s the power of compounding.

You may consider investing in equity mutual funds. Equity has the potential to offer a superior type of returns than another form of asset classes, including gold, over a long period. Also, stocks can offer you inflation-beating returns

Now I know you have a question in your mind that if I invest in mutual funds- in which company I invest.

No Problem I Can Tell You (Gold or Mutual Funds)

In large-cap mutual funds, you may invest in the following funds: ICICI Prudential Bluechip Fund, Aditya Birla Sun Life Frontline Equity Fund and Aditya Birla Sun Life Equity Fund, SBI Bluechip Fund.

In multi-cap mutual funds, you may consider investing in Kotak Standard Multicap Fund and SBI Magnum Multicap Fund.

From all these facts and figures or previous year data, we conclude that mutual fund is the best asset class to invest. See you have a long time horizon so it’s good to opt for mutual funds rather than invest in gold.

Now you are thinking that ok it is good for me but how will I get returns from mutual funds, I have no prior experience in this, how can I buy and all. All these questions are eating your brain I know. No problem dear, I can explain to you how you will get the return, what are the other best options for you.

Read: Save Your Money By Investing in PPF or Fixed Deposit (FD)?

Returns on Mutual Funds

As an investor, you may get your returns in two ways i.e. Dividend, Growth Option :

  • Dividends: A mutual fund earns income from dividends on stocks and interest on bonds that are held in the fund’s portfolio. So, when these kinds of assets earn an income, the fund distributes its income in the form of dividends. These returns are offered regularly. 30 day’s Income Plans, a kind of MF meant for regular dividend income, is one of the most preferred fund types in India.
  • Growth option-: You have an option that you can also choose to reinvest your returns into the fund. This is a good idea if you know that the fund has a greater potential to earn more returns in the future. By reinvesting, you get more benefit from the compounding effect on your returns. This can increase returns over a long period.

How You Will Buy and What Are The Other Options?

Some there are some mutual funds companies are available in the market which sells mutual funds. I know that in today’s date everyone have insurance or different-different type of insurances, you have to contact with your insurance agent and ask them whether his company sells mutual funds or not because now most of the insurance companies also sell mutual funds.

Now there are such types of insurance in the market that your money is directly invested in mutual funds when you pay the premium for your policy, then from that, you can invest in mutual funds also and if you feel that your agent does not know all these, he always thinks of himself, then you can take such type of information and information about such insurances or to educate more yourself about these types of products, you can go the following and read about such type of insurances.

Other Options: EET, EEE, ETE (EXEMPT TAX EXEMPT)-Learn The Basic Fundamentals

Conclusion

As an investor, you have several options to invest your money in different-different asset classes. But your investment capital can only earn income for you only if it is invested in the right place. So, choose the funds carefully or cautiously before you invest your money. I think this guide to investing in Mutual Funds or gold will help you in making your decision. So first always do your homework before you dip your feet in the Mutual Fund pool.

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  1. Pingback: Top 5 Investment Plans in India: Save For Your Future - InvestPolicy.com

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