With marriage comes in a great deal of responsibility. Adulthoods major vision is towards investment. The only safest options we have known since times immemorial are the investment on Gold or Fixed Deposits. So, now which of them is best?Let us hear it from the industry experts…
Which is better for investment, gold or fixed deposits?
Choosing between gold and fixed deposit is one of the toughest things that an investor has to deal with as both are good investment options that promise massive returns over a period of time. However, when it comes to choosing one over other, experts believe that one must invest in fixed deposits and not go for hard gold if one does not require hard gold in future.
Many people in the country are also unaware of the fact that buying gold from the bank and from mutual funds are two different things. No bank would be willing to buy back the gold or the bullion you’ve purchased from there. The only option you are left with in this case is to sell the gold to your jeweler or convert it into an ornament which you can use yourself or gift to someone. Investing in gold is a luxury, not an investment as per some experts. But let’s suppose, you are saving the gold for a wedding in your family, in that case, you can invest in gold systematically before the prices go up significantly.
On the other hand, you can consider investing in gold through Gold Exchange Traded Funds (ETFs) or Funds of Funds (FoFs). ETFs are similar to stocks but you need to have a DEMAT account to invest in them. Also, a few experts believe that investing in ETFs comes with greater risk probability and unpredictable returns. Alternatively, FoF is similar to mutual funds that invest in certain Gold ETFs. Since FoFs are professionally managed by fund managers, the returns there are quite predictable and involve less risk as compared to ETF but the returns in FoFs are generally less since there the expense of fund managers is accounted for.
Coming to the comparison between gold and fixed deposits, it is always good to invest in bank fixed deposit schemes for the reason that they are safe, free from risks and deliver assured returns too. Fixed deposit interest rates are also higher when compared with the savings account. Investing in a fixed deposit is lucrative when it is done with a long-term perspective. Most people invest in more than one FD with different tenures and which are meant for different purposes.
Fixed deposits are flexible in nature. They can be opened for a minimum of 7 days and can go as high as 10 years depending on the choice of the investor. Money from the fixed deposit can be withdrawn by paying the penalty amount to meet urgent financial needs such as a wedding, medical emergency or a business loss.
The interest earned on the fixed deposit investment is paid at different intervals including monthly, annually and even wholly, at the time of maturity. Therefore it is up to the investor which term he/she chooses. The monthly and the annual interest payments serve as the extra income for the investor and hence can reinvest for higher benefits at maturity. When you are investing in fixed deposits, you must create FDs with different providers so that at the time of emergency, you break any one FD and others remain intact for further use.
With physical gold, on the other hand, whenever you plan to sell it, you will have to ideally take it to the same jeweler you bought the gold from. If you take it to another jeweler for reselling, he/she is likely to reimburse you the gold’s cost only after deducting 10% of the cost of gold ornament. A further deduction is possible by the jeweler if the gold doesn’t have a hallmark (i.e. a certificate from a government authorized center mentioning the gold’s purity). Also, your investment on your gold ornament is dependent on the rise in the market. If for example, the gold prices drop, which knowing the history of gold rates may be an unlikely circumstance, your gold ornaments will be devalued. This is not the case with FDs which will earn you interest on your investment no matter what.
Moreover, with gold, its market rate varies from one city to another as the various jewelers’ associations determine the gold rate through their own methodology and so you will have to keep that in mind too as in some city the gold rate may be less than the gold rate in any other city. You may find the gold rates in various cities including about gold rate in Kerala through various websites on the internet and other public platforms.
Conclusively, when it comes to choosing between buying gold and fixed deposits, the latter seems to be the better investment option. Not only FDs inculcates the habit of saving, but also offers good returns on investment. Gold, on the other hand, can be a good investment if you want to hold on to gold ornaments. Exchanging gold for money will be a tough and time-consuming task altogether. However, to reiterate the disadvantages, as every solution has one, FDs can’t be broken without paying a significant penalty.