Investment in Gold vs. Investment in Mutual Funds

Investment in Gold vs. Investment in Mutual Funds: Which is the Better Option

  • By
  • Published
  • 10 mins read

Investment in Gold vs. Investment in Mutual Funds: Which is the Better Option

  • Post author:
  • Post last modified:November 7, 2023

Gold has always been an integral part of Indian culture for centuries. Hence, investment in Gold has always been a top priority for a majority of Indians over the years. More than a financial investment, buying gold holds great cultural and societal significance in India. Any festivities are considered incomplete without gold and it also passes as a treasure that passes on from one generation to another.

In terms of finance and investments, gold’s value has always appreciated over the years. If we consider the growth in the last 5 years, no asset has gained a growth rate equal to gold. However, with the economic changes globally, even gold has witnessed a shake in the market. With the degree to which the price of gold has shaken in the last 6-7 months, the whole market is skeptical about the success rate of our beloved gold.

If you are planning to invest and want to know in detail which investment is best, we’ve got you covered. In this article, you will find all the details on gold vs. mutual funds, which will help you decide which is best, Investment in Gold vs. Investment in Mutual Funds.

Investing in Gold

Though other forms of investments are always on the rise, some people still prefer traditional modes of investment such as gold or property. But with the recent fumble, even traditional investors are turning to new forms of investments. One such avenue that has picked up the pace is mutual funds. In recent trends, it has been seen that investment in mutual funds is at an all-time high. They mitigate risks and offer higher returns.

Investing in Mutual Fund

Mutual funds work on the principle of not putting all eggs in one basket. This means that Investment in Mutual Funds is a less risky business as your money is distributed among a wide spectrum of industries. This diversion reduces risks and maximizes profits. The difference between gold and mutual funds is that while investment in gold doesn’t require any planning or research, investment in mutual funds is a lengthy process and requires comprehensive research and planning. 

Difference Between Investment in Gold and Investment in Mutual Funds

Let’s dive into the ‘gold vs. mutual funds’ debate and detail the features of both through the table below.

Base Investment in Gold Investment in Mutual Funds
Definition Gold is a precious shiny, yellow metal found in nature. It doesn’t rust or lose its color. People treasure it for jewelry and money because it’s valuable and useful. A mutual fund is a complex investment product where multiple investors combine their money to create a diverse portfolio of stocks, bonds, or other assets. Managed by experts, it offers shared risk and potential returns for investors.
Category Gold is a functional asset as well as a financial commodity. Mutual funds are a form of investment.
Types available                    Physical and Digital Gold Equity, Debt, gold, and Hybrid
Options to buy You can buy gold in physical form and in digital form.


Physical Form: Jewellery, Bullions, gold monetization scheme.


Digital form: Gold Mutual Funds, Sovereign Gold bonds, and ETFs.



You can choose from these options as per their security and investment modes.


Debt: Liquid, ultra-short-term, credit risk funds, etc.


Equity: Large-cap, mid-cap, small-cap, value funds, multi-cap, etc.


Modes of Management: Actively Managed Funds and Passively Managed Funds


Modes of Investment: Regular Plan and Direct Plan


Management The buyer is the sole manager of this investment.   Finance professionals in the investment market manage mutual funds.
Trading You can buy and sell gold:


  • Without an intermediary
  • Without documentation
  • And without any charges


You can buy or sell mutual funds:

  • With an intermediary
  • With proper documentation
  • And with entry and exit charges.
Diversification/ Strategy There is no distinct diversification. However, one can divide it into physical gold and gold ETFs, which are essentially the same things.        There is a lot of diversification in mutual funds through investment in various securities.
Risk factor Some degree of risk is involved in physical gold due to robbery or theft. ETFs pose no risk. Mutual funds do not involve such risks. You can buy and sell them online, limiting the risk of theft or burglary.
Variety There is no variety of gold. The only differentiator between gold is the quality. The quality is measured in karats, 24K being costlier than the lower grades of 22k, 18k, and 14k.



There are many kinds of investment in mutual funds and so is their variety. It depends on the kind of fund based on the risk factor.
  • Don’t encash the market highs.
  • No earnings
  • Doesn’t pay dividends



  • Yields substantial returns to the investor.




Cost of Investment Since the price of Gold is quite high, it is not easy to invest in it. Not everyone can think of Investment in Gold unless they have enough substantial savings as even the minimum investment is very high.


When it comes to Investment in Gold vs. Investment in Mutual Funds, Investment in Mutual Funds is very affordable as compared to Investment in Gold. You can start with a low price to begin your Investment in Mutual Funds. The amount will depend on the number of units you want to buy from a particular mutual fund.


You can start with as low as 1000 rs as an Investment in Mutual Funds.

Liquidity Gold is highly liquifiable. You can trade it with anyone anywhere who is willing to pay it’s worth.



Mutual funds also come with good liquidity. You can encash them at the current net asset value. However, you can only sell it in specific areas of the market and not to anyone, anywhere.
Stability Investment in Gold is stable. Though it is not prone to market fluctuations, it is hardly ever affected by trends in the long term.


Even when the market crashes, investors seek out safe options like gold to invest in.

This results in an increase in the value of gold.



Investment in Mutual Funds is dynamic in terms of stability. They are highly volatile and keep on changing as per the market. This is why, people who invest in mutual funds are always on their toes to get profits. Therefore, when it comes to Investment in Gold vs. Investment in Mutual Funds, mutual funds come with low stability but higher returns.


During the market decline, the stock market also crashes, resulting in the decline of a NAV fund. However, this decline is not for a long period of time. Over time, the market gains its value again, and so does the mutual fund.


Market Understanding Investment in Gold doesn’t require any market research. Anyone can know the current rates of gold through the public forums easily available everywhere. Moreover, even a non-investor would know the price of gold in India, they just need to know for long they should hold it for maximum returns.



Investment in Mutual Funds is a little tricky in terms of knowledge. One has to have a deep understanding of market trends to be successful. The most important difference between gold and mutual funds is this, you should know the ins and outs of mutual funds to derive maximum profits.
Diversification Investment in Gold vs. Investment in Mutual Funds in terms of diversification is very important.

Investing in gold gives you an overall portfolio diversification. This safeguards from inflation and having a bucket of investment that is safe.


Investment in Mutual Funds is inherently diverse. Since you hold 2-3 mutual funds across different baskets of securities, the investment becomes safe and gives great diversification.
Involvement Investment in gold doesn’t require you to monitor your assets constantly. This is a long-term investment, hence one can relax and not worry constantly. Investments in Mutual Funds are managed by mutual fund managers. Since mutual funds vary a lot with the market trends, it is essential to monitor them constantly which is only possible for a professional who dedicatedly looks after mutual funds.


Tax benefits Gold doesn’t give any tax benefits typically, except for gold monetization schemes and sovereign gold bonds.


You can invest in Equity Linked Savings Schemes (ELSS) funds, which are the only mutual funds that give you tax benefits under Section 80C of the Income Tax Act, 1961.
Compound benefits There are no compounding benefits in gold as it doesn’t yield dividends or interest, and there are no reinvestments. Mutual funds give great compounding results. As a long-term investment, you can invest in ‘Growth Funds’, which will yield great compounding results.

Who Should Consider Investment in Gold?

The value of gold does not depreciate even though there are no substantially high returns. This makes it a low-risk investment, which investors consider to have a diverse financial portfolio. Gold is also a physical asset that can be used to make gold jewelry, ornaments, coins, etc. which hold great societal importance. Additionally, you can check the purity of gold anywhere which makes its value appreciating in the future.

One of the most important parts of gold vs. mutual funds is that they both are highly liquefiable. You can easily use them in case of emergency.

Therefore, in the topic “ Investment in Gold vs Investment in Mutual Funds”, gold is the safe investment option, that increases in value over a long period of time.

Also Read: ULIP Plans vs Mutual Funds

Who Should Consider Investment in Mutual Funds?

Since mutual funds diversify the investments in different asset classes, the risk decreases. You can invest in both debt and equities in different sectors. Professionals managing mutual funds constantly work to help gain maximum returns for their investors. As per the data, mutual funds constantly give high returns to investors.

Therefore, for a person who wants to have a diversified portfolio and has little appetite for risk, you should invest in mutual funds. However, you can find funds with almost zero risks as well like debt funds. Liquid schemes and ultra short-term funds are low risks but the returns will also be a little on the lower end, However, if you are willing to take some levels of risk, you can invest in equity funds like large cap, mid cap, small cap, and multi-cap funds. For a moderate level of risk, you can pick long-term debt funds.

Hence, mutual funds can be suitable for any type of investor. You can pick and choose the best suited for you.


With the details provided in the above article on gold vs. mutual funds, you can decide the type of investment you want to make. Investment in Gold vs. Investment in Mutual Funds comes with both advantages and disadvantages, but with the right set of knowledge on your needs, investment portfolio, and budget, you can make the decision. In the end, ‘gold vs. mutual funds’, will work out in your favor if you manage them diligently.

Leave a Reply