Mutual fund SIP v/s gold SIP: Which one will make your money grow faster? Find out

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Mutual fund investments have become a preferred investment option for many investors. Its superior returns, professional management and diversification have made it an attractive avenue of building wealth.

You can invest in mutual funds either through the lump sum mode or via Systematic Investment Plans (SIPs). Similar to mutual funds, gold funds and gold ETFs can also help you grow your money. You can also invest in SIP for gold ETF and gold funds.

In this article, we compare gold SIP v/s mutual fund SIP to help you decide the faster route in growing your money.

Mutual fund investments v/s gold investments

Here are some fundamental differences between the investment options.

  • Definition

A mutual fund is a market-linked investment option that invests in equities, debts and other money-market instruments from the pool of money collected from various investors.

Gold is a precious, high-value metal that has been among the top traditional investment options for decades.

  • Management

Mutual funds are managed by professional fund managers with years of experience and technical knowledge to handle investor portfolios. They are skilled and know where to invest based on your investment profile.

You can invest in gold on your own, without the need for experts.

  • Risk

Investing in mutual funds is secure. They can be bought and sold online.

Investing in physical gold can be risky due to its chances of being stolen. It also requires a safe place to store it.

  • Returns

Mutual funds are subject to market volatility. Yet, they can offer substantial gains in the long run, which can be higher compared to traditional forms of investment. Some mutual fund types also offer stable income in the form of dividends.

Gold does not offer dividends. Nor is it capable of encashing on the highs of the market.

  • Investment cost

Investing in mutual funds can be affordable and flexible. You can invest via SIPs starting as low as Rs.500. The fixed intervals can be weekly, monthly, quarterly, semi-annually or annually.

Investing in gold involves a high cost. On average, 10 grams of gold could cost Rs.31,000 (at the current date, this article is published).

Conclusion

As a new investor, it can help to read on what is a mutual fund and how to go about investing in SIPs. Typically, a mutual fund scheme can draw returns between 13% and 15% for a long-term horizon such as 20 years.

In the case of a gold SIP, investors can expect almost similar returns with a margin of 0.25% to 0.5%. For both the options, investors must pay the same taxes. So, you can choose to invest in either investment option that aligns with your investment goal. Or you could invest in gold and mutual funds and distribute your funds proportionately.