Gold vs Mutual Funds: Which is the Better in 2025?
In today’s complex financial landscape, investing your money right can be very difficult. With rising inflation and market volatility, the age-old debate resurfaces: Should you invest in gold or mutual funds? well, we all know that investing in Gold or a Mutual fund can be a good option, but the fact is, we never hold our portfolio for the long term. why? it just because of the market volatility and fear of losing all capital. The market says, if the market is going down, then invest more, but people go the opposite way. this is the few reason why people cannot make money. Investing in gold or a mutual fund might be riskier than an FD ( fixed deposit ), but believe me, if you invest in these two things, your portfolio will always remain Green. guys, if you have enough money to invest and are ready to take risks, then I’ll suggest going with stocks also. Investing 20% in GOLD OR a MUTUAL FUND and 30% in Stocks will be a good option. but if you don’t want to lose money or risk your capital, then invest in gold or a mutual fund only. they are less risky than stocks and have a higher return than FD.
In this article, let’s discuss GOLD VS MUTUAL FUND, which is better for investment. So let’s start with an introduction.
1) What is Gold investment and its types :
Gold is considered the safest way to invest and secure our money. However, gold does not provide you with more returns, but compared to stocks chances of losing money are very less.
There are multiple ways to invest in gold today:
1)Physical Gold (jewelry, coins, bars)
2)Gold ETFs (Exchange Traded Funds)
3)Digital Gold via fintech platforms
now, the point is in these types of gold we should invest in?
In my view, if you are not emotionally attached to gold, then invest in a GOLD ETF or Digital coins. In Asia, most people buy physical gold because they like to touch the material or look rich in front of society, but having physical gold will not give you any interest or return. while Gold ETF or Digital coins give you a return and double your money if you invest for the long term. Over a 10-year period, the average return of gold is 8%; you might get a higher return now, but not a lower one. you can physical gold, but don’t invest all of your money in buying physical gold.
2) Why should we invest in gold?
When inflation rises, the value of the currency goes down. Over the long term, almost all major currencies have depreciated relative to gold. But gold prices have doubled over the last five years and quadrupled in a decade. specially,
In a country like India, where every saving instrument may not provide returns, gold fares well when the inflation rate exceeds the interest rate. Gold is also considered a tangible asset and used for cultural events like weddings and other traditional rituals. gold has created its emotional value in humans, especially in Asian countries.
3) Negative points of buying Gold?
As I said earlier, investing in physical gold will not give you any return or interest. also, if you have physical gold, then you have to pay making-ornament charges, which are 3% to 25 %. and you will be required to use a specific locker for gold security. So if you go for a bank locker, then they will charge between 1000 Rs. to 10000 Rs., depending on location and state. or you have to buy your own locker.
Except for physical gold, other Gold returned approximately 19% on average, largely due to inflation and geopolitical uncertainty. Source: Statista
2) What Are Mutual Funds?
Mutual funds pool money from multiple investors to invest in a diversified portfolio of stocks, bonds, or other securities. A mutual fund is less risky than Stocks, although it will not give you a higher return than stocks. there are multiple types of mutual funds.
1)Equity Mutual Funds (stocks)
They are good for long-term growth ( more than 10 years ) or return with an average rate of return in India, which is 9.86% to 13%.
2)Debt Mutual Funds (bonds)
If you want to invest in a fixed-income asset or generate more returns than an FD, then a debt mutual fund will be a good option for you. fixed-income like Treasury bills, government bond ,corporate bonds and schemes. The average rate of return is 7% to 9% if you invest for 1 to 3 years.
3)Hybrid Funds (mix of equity and debt)
Hybrid funds are a combination of equity and debt investments that are designed to meet the investment objective of the scheme. you have to invest more than 3 years, i.e 3 to 5 to get 10% to 12% average return.
4 ) Pros of Mutual Funds
*Professional management
*Diversification lowers risk
*Suitable for long-term growth
5)Cons of Mutual Funds
*Management fees (expense ratio)
*Market risk (especially equity funds)
*Lock-in periods in some cases ( minimum 1 year of lock, otherwise you will pay more exit load ratio )
In the U.S., 56% of households invest in mutual funds. Source: Investment Company Institute
While in India, only 6% invest in mutual funds.
Gold vs Mutual Funds: Side-by-Side Comparison
| Feature | Gold | Mutual Funds |
|---|---|---|
| Risk | Low | Varies (Equity = High, Debt = Low) |
| Liquidity | Moderate | High |
| Return | stable ( 5% to 9% ) | Higher, ~10-12% avg (Equity Funds) |
| Inflation Hedge | Strong | Moderate (depends on fund type) |
| Taxation | Capital gains applicable | Tax-efficient options available |
| Best For | Wealth preservation | Wealth creation |
Historical Returns: A Look at the Numbers
Gold (2013–2023): Average return of 5-6% annually Source: Statista
S&P 500 Mutual Funds: Average return of ~10% annually over the past 90 years. Source: NerdWallet
What Financial Experts Say
“Gold gets dug out of the ground… then we melt it down, dig another hole, bury it again, and pay people to stand around guarding it. It has no utility.” — Warren Buffett. Buffett is a known advocate for productive assets like stocks and mutual funds.
“If you don’t own gold… There is no sensible reason other than you don’t know history.” — Ray Dalio, hedge fund billionaire. Dalio supports gold during periods of high inflation and low trust in fiat currencies.
Global Perspective
India: Gold is both an investment and a cultural asset
USA: Retirement portfolios dominated by mutual funds (401k, IRAs)
Middle East: Preference for gold and real estate
This variation highlights the importance of location, accessibility, and investor psychology in shaping preferences.
Final Verdict: Which One is Right for You?
Both gold and mutual funds have a place in a balanced portfolio. Here’s a simple takeaway:
Choose Gold for stability and wealth preservation
Choose Mutual Funds for long-term growth and compounding
Do both for diversification!
In 2025, the key lies not in choosing one over the other but in aligning your investment mix with your financial goals, risk tolerance, and time horizon.
Also Read: 5 BUDGETING TIPS FOR STUDENTS
Also Read: India’s growth after 1991: Developed or myth
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