It’s that time of the year when individuals assemble in the streets to grab a piece of the yellow metal to either add some glitter to a forthcoming wedding or to add a touch of auspiciousness to the widespread festival – Diwali.
But in their eagerness, people often tend to splurge on gold by convincing themselves that they are investing rather than spending; as the value of the gold is likely to go up in the future. While the justification isn’t completely incorrect, it lacks some chief considerations.
Are you investing in gold this Diwali like every year? You might want to rethink. Well, yes, you can buy gold, but your profit, in the long run, can be much more if you plan on investing in a long-term financial instrument. This is where mutual funds come into the picture. This article will serve as a mutual fund investment guide and help you choose the among different types of investment.
Investing in Gold
Investments in physical gold in the form of gold jewelry, bars and coins are on boom during the festive season. According to the Hindu mythology, Diwali is observed as one of the most auspicious times of the year to invest in gold. Thus, you can spot well decorated jewelry outlets and showrooms enticing consumers. But investing in physical gold is also accompanied with a set of risks. One of the most significant risks is storing physical gold as it is prone to burglary and theft. Additionally, it also attracts extra charges in the form of making charges which can go as high as up to 20% of the price of gold depending on the design and the jeweler.
You can also choose to invest in gold can in the form of Sovereign Gold Bonds, Gold Exchange Traded Funds (Gold ETFs), or E-gold. You can consider to invest in sovereign gold bonds as they provide investors with the benefits of interest along with price appreciation.
There has been a record surge of over 26% in the prices of gold in this year. This makes gold one of the most preferred investment options during this festive season. Don’t forget that gold funds are considered to have negligible default and credit risks.
Investing in Mutual Funds
Mutual funds are a broad asset class that enjoys broad classification. There are various type of mutual funds available in the market to cater to the varying needs of investors, making them suitable for all. Some of the popular mutual funds are equity or debt funds, regular or direct funds, hybrid or balanced funds etc. Based on your investment style, there are commonly two ways to invest in mutual funds – Systematic Investment Plan (SIP) and lumpsum investment.
Mutual fund investments can prove to be a good investment plan given you choose a fund wisely considering your investment portfolio. There are several benefits of investing in mutual funds including the power of compounding, professional management, diversification, etc.
Market fluctuations have a direct impact on mutual fund investments. Hence it is essential to understand all the insights about your scheme before investing in mutual funds. Mutual fund experts always advice investors to ensure that investments align with their risk appetite, investment horizon, and financial goals.
Whether you choose to invest in gold or mutual funds entirely depends on your investment portfolio. However, if you wish to diversify your portfolio, we advise you to invest proportionately in both the instruments according to your portfolio. Happy investing!