MUTUAL FUND VS GOLD
WHAT IS THE RIGHT CHOICE FOR 2020?
The eternal confusion of whether to invest in gold or mutual funds has become even more interesting in 2020. Covid19 pandemic has caused loss of jobs, startups to shut down, multiple business sectors facing an all-time low. But most of all, it has changed priorities. So, what should be your investment priority?
Some interesting facts come to mind.
● Investing in gold can be either in physical form, sovereign gold bonds (SGBs) or gold Exchange Traded Funds (ETFs). Out of these SGBs provide interest as well as price appreciation.
● Gold prices have surged a record 36% since the beginning of this year and crossed Rs.56,000.
● As an asset class, gold funds have no default or credit risk.
● After the economic crises, gold was the first asset to bounce back in both 2001 and 2008.
● Mutual funds have many broad classifications; so, either regular or direct, equity or debt, sector wise divisions, SIP (Systematic Investment Plan) or lumpsum, and more.
● Some of the best performing mutual funds have given marvelous annualized returns like 21% for Franklin India Taxshield fund since inception and 13% in the last 10 years.
● 20% of Mutual funds beat the market in 5 years.
● It is a myth that mutual funds are only for long term. Short term investments can also be made. Although ‘time in’ the market is more important that timing the market in case of mutual funds.
According to Astro Strategist Hirav Shah, your investment in 2020 should be based on the time period you wish to stay invested. So, whether you are a short-term contender or a horse in for the long race, here are your options:
SHORT TERM INVESTMENTS – Gold investment is a better choice for short term as of now. Gold prices are upwards of 56K INR and will show 10-15% rise in the next two months. The period till Diwali is beneficial as gold prices are expected to touch 65-68K. Thereafter the prices will show decline.
Mutual funds are not suggested for the short term in the current scenario. The markets are volatile, which works in favour of gold. And with the US Election on the horizon, the volatility will remain with severe ups and downs for the stock markets.
LONG TERM INVESTMENTS – Equity mutual funds are your best bet if you are in for the long haul. History shows that after any economic crises, there is a sharp rise in the markets and that rally is definitely worth staying invested for. Over the years, the gains overshadow the losses. You will not only beat inflation but get record returns as well.
In the words of Hirav Shah, 2020 is the ‘Year of Gold’, 2021 will be the ‘Year of Mutual Funds’ and both options can prove very lucrative for the investors. So, stay positive, choose wisely and grow your money! May there be a lot of money in your bank account.