Should I Invest In A Mutual Fund Or Etf - Conventional investments in gold and modern investments in funds; both are useful, but which is more useful? Before we compare, let's get a basic understanding of the two.
Gold has been the preferred investment choice for Indians for centuries. Gold is not only an investment, but also has sentimental value. Indian families usually refrain from selling gold bought as an investment, as it means long-term wealth creation. Gold was used as currency for years before paper money came into the world. Although gold is a conventional source of investment, it can still outperform today's instruments because of its value.
Should I Invest In A Mutual Fund Or Etf
Equity funds are funds managed by professional managers where an Asset Management Company (AMC) collects funds from retail investors to invest in stocks, bonds and other assets. In recent times, investments in mutual funds have grown, mainly because of their many advantages. Portfolio diversification, variety of options, expertise in fund management, and most importantly, the benefit of compounding have made mutual funds a popular way to invest, especially for beginners.
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Returns on mutual funds vary between different plans. However, taking the index as a base, the funds have delivered around 10%-12% returns annually. Few funds have even gone so far as to give returns of up to 15-18% per annum.
Most mutual funds invest in the stock market, which makes them riskier than investing in gold. However, they are not as risky as direct stock market investments because they are professionally managed by expert fund managers.
Gold is a very liquid instrument as you only need to go to the nearest jeweler to convert gold into cash. Even digital gold can easily be converted into cash (except for gold government bonds).
Gold has shown record performance during the crisis. Usually, in a crisis, the stock market plunges, so investors look for safer investment options. Therefore, they invest in gold, and when the demand for gold increases, its value begins to rise.
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During a crisis, when the stock market plunges, the NAV of the funds also falls, reducing the value of the investor's portfolio. However, this is temporary in most cases because when the market goes into correction, the fund recovers the lost value and starts to recover.
With the exception of government gold bonds and gold monetization schemes, investing in gold usually does not come with tax benefits.
Gold provides no additional benefit as it does not provide dividends or interest to its investors, which can be reinvested.
Mutual funds are one of the best sources of investment when it comes to compounding. Investing in "growth funds" yields the best compounding results over the long term.
Direct Vs. Regular Mutual Funds
A mutual fund is a diversification tool in itself. One fund invests in a number of companies, which in itself diversifies the portfolio. Holding 2-3 funds provides great diversification benefits.
While investing in physical gold may require thousands of rupees, investing in digital gold can be started with an amount of Rs. 100.
A: In SGB, interest income is taxable, but capital gains are exempt. In GMS, both interest income and capital gains are exempt.
A: If possible, an investor should prefer Digital Gold because it eliminates the risk of theft and saves on renting a safe.
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A: Active funds are actively managed by the fund manager. Passive funds track the performance of a specific index. The portfolio should have a combination of active and passive assets.
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