- Wealth accumulation needs long-term financial planning and consistent savings
- Gold, mutual funds, and fixed deposits are popular savings instruments across incomes
- Equities suit long-term investors; hybrid funds or FDs preferred for short-term horizons
Wealth accumulation with consistent savings requires long-term financial planning. With so many investment options available in the market, choosing the appropriate savings instruments could be confusing. However, gold, mutual funds and fixed deposits, among others, are some of the most popular savings options among investors across all income groups.
Different investment options come with their own risks and rewards. Based on their historical returns, they are also recommended for different investment tenures. For instance, highly volatile equity-linked products are generally not recommended for a short-term investment horizon. In this case, one may opt for hybrid funds, debt instruments, or fixed deposits.
Similarly, for longer durations, one may look at equities or even gold as they have potential for higher returns and can spread risks over longer investment durations.
While both gold and equities seem attractive, they come with their own risks and benefits. Equity mutual funds have potential for occasional extraordinary returns, sometimes more than twice of FDs. On the other hand, gold is a much-preferred asset for risk-averse investors. The yellow metal has been a safe-haven investment option for many due to its steady returns. As per past trends, investors can expect returns of around 10% per annum from gold investments.
Gold vs SIP Over 15-Year Horizon
If you are looking forward to an investment tenure of 15 years, both gold and mutual fund SIPs could be suitable options. But, final decision should be taken based on your risk appetite and financial goals.
Let's try to understand how both SIP and gold could be rewarding for a monthly investment of Rs 5,000.
Mutual Funds
Tenure: 15 years
SIP Amount: Rs 5,000 monthly
Expected returns: 12%
Invested amount: Rs 9,00,000
Estimated returns: Rs 16,22,879
Total value: Rs 25,22,879
Gold:
Tenure: 15 years
Amount: Rs 5,000 monthly
Expected returns: 10%
Invested amount: Rs 9,00,000
Estimated returns: Rs 11,89,621
Total value: Rs 20,89,621
As seen, mutual fund returns appear more attractive over a 15-year period as they benefit from expected higher returns and the power of compounding. However, SIP schemes are considered high-risk instruments and the returns are never guaranteed. While returns are not certain in gold as well, they are considered safer than mutual funds.
In any case, it is recommended to discuss your financial goals with an expert before making any significant investment.
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