Gold vs SIP: Which Will Fund A Rs 20 Lakh Wedding Faster?
Gold and mutual funds could be suitable instruments to accumulate Rs 20 lakh for a wedding. Here are key factors to take into account.
Wedding planning in India can be an expensive affair as many people tend to spend lavishly on what they consider the most memorable event of their lives. The financial burden increases further as couples look for designer clothing, fancy decoration and high-end catering service for guests. In India, weddings have traditionally become an occasion to display wealth and social status. With the modern trends and rising costs, the budget for an average wedding can run into lakhs.
Preparing in advance for raising a sizable corpus for the wedding could help you enjoy your big day without financial stress. Gold and mutual funds could be suitable instruments to accumulate funds for your wedding. If you are looking to build a wedding corpus of Rs 20 lakh, these instruments could be helpful in reaching your target with medium-term to long-term planning.
The overall investment horizon plays a crucial role in building wealth, as the power of compounding determines how your portfolio grows. A shorter investment period typically generates lower returns because compounding has less time to work.
Gold v Mutual Funds
In the context of historical returns, both gold and mutual funds have rewarded their investors significantly. While mutual funds are known for their ability to generate higher returns, there have been periods when gold has outperformed equities.
Historically, equity-oriented mutual funds have given at least 12% returns, while gold has given around 10% returns. However, they have also delivered above-average returns during specific periods. For instance, gold delivered over 13% returns annually between 2010 and 2025.
This shows that over a specified tenure, both assets may be able to generate higher returns, depending on a range of factors such as global economy, geopolitical situation and market sentiment, among others. This is why financial experts usually recommend diversifying the investment portfolio to reduce risk and create a more stable path. Overall, this decision should be based on one’s risk appetite and investment targets.
However, if someone were to invest in these two assets, based on their historical returns, here’s how it would look:
Mutual Fund:
Monthly SIP amount: Rs 8,700
Investment duration: 10 years
Expected rate of return: 12%
Invested amount: Rs 10,44,000
Estimated returns: Rs 9,77,349
Total value: Rs 20,21,349
Gold:
Monthly amount: Rs 10,000
Investment duration: 10 years
Expected rate of return: 10%
Invested amount: Rs 12,00,000
Estimated returns: Rs 8,65,520
Total value: Rs 20,65,520
As seen from the above calculation, equity-oriented mutual funds come with a higher potential to generate more wealth over the same tenure, compared to gold. A higher SIP amount or a step-up SIP feature, which allows a steady increment in the monthly amount, could help you reach your goal faster.
It could be a prudent step to discuss your investment plans with a certified professional before choosing between gold and SIP. The investment strategy should be devised after taking into account your risk appetite, investment horizon and financial condition.
