Is Investing in Fixed Deposits Better Than Investing in Gold?

fixed deposits better than investing in gold

Investments can be of different natures. Among the considerably conventional and common methods of investment are fixed deposits and gold investments. Deciding which one to go with can get much easier if you know the kind of returns each one offers, the term flexibility, and how easy it is to liquidate them. When you attempt to get some investment advice, to Invest in gold and to consider FD as investment is the most familiar advice you are likely to get from your close ones like your friends and family.

In this article, we will look at these investment options in detail. We will also work out the comparative analysis between Gold vs Fixed Deposits.

FD as investment is a  safe option when compared to mutual funds and stocks. It is not impacted by outside factors. Therefore it is a more potent alternative for both short term and long term goals.

The return rate on Fixed Deposits is anywhere between four per cent and six per cent. It is different in different banks. However, even if the returns are assured, it doesn't beat inflation. They have indexation benefits that help bring down taxable gains. There are no such benefits in investments such as mutual funds and stocks.

What Gets Fixed Deposits on Par With Gold as an Investment?

FD as investment is supposed to be the most protected investment option accessible in the financial market. A fixed deposit is not bound to external market factors online when you invest in gold. The tenure and the rate of return are the two aspects to be considered. A fixed deposit gives assured and predictable returns unless you withdraw the invested money before maturity.

Risks involved

  • The gold price can be combustible and erratic at times, when you look at it as a long-term investment it always appreciates. It performs as a fence against inflation. Thus it is better to invest in gold.
  • FD as investment guarantees fixed returns. They are also independent of any external factors. The tenure is the deciding factor though. The longer you keep your money fixed, the higher the returns you will earn.

Return Rate

  • If you invest in gold, you can procure a hefty and tangible return rate. Gold has given us inflation-beating outcomes. The returns have been higher in recent years due to an upswing in the price of gold.
  • Fixed deposits prove fixed returns that the banks set. A good thing about fixed deposits is that there are guaranteed returns. This is regardless of the kind of money you have deposited. Senior citizens get a higher rate of interest on fixed deposits.

Liquidity

  • Gold is the choice for many customers owing to how easy liquidating gold is. There are no storage hassles whatsoever. Moreover, there are no making charges on digital gold. Returns depend on the prevailing market rate of gold.
  • When it comes to fixed deposits, liquidity depends on the banks or the financial institution's policies. There is a penalty for premature liquidation of fixed deposits. You can look for penalty-free options when investing in a fixed deposit.

Loan against an FD and loan against Gold

  • Banks usually give 80 per cent of the gold value and the fixed deposit amount.
  • Banks and other financial companies offer interest rates that are relatively lower as compared to the rate of interest on personal loans.

What are the Benefits of Investing in Fixed Deposits?

Listed below are some of the benefits of investing in Fixed Deposits.

Fixed Deposits give you guaranteed returns

Fixed Deposits fall In the category of the most stable and protected investment options. This investment option is barely market-driven, unlike mutual funds. Investors are given an interest rate that remains constant all through the tenure. Considering FD as investment option helps you plan your finances better.

It encourages Saving

We all like to save but only a handful succeed at doing it. Fixed deposits encourage you to do the same. Fixed deposit investments do not attract significant risks. This makes people less hesitant in investing in fixed deposits.

The other thing that draws customers towards this investment option is that it can be liquidated any time there is an emergency. All you need to do is break it prematurely. There are zero penalties in some banks while in others it is almost negligible.

Fixed Deposits are a Great Option for Tax Saving

All banks give their customers tax saving options and fixed deposits in terms of the security they offer. Fixed deposits help customers bring down taxable income.

Fixed Deposit Interest Rates are Relatively Higher for Senior Citizens

Most financial institutions and banks offer a higher rate of interest on fixed deposits to senior citizens. It usually ranges between 0.25 to 0.65 per cent above the regular interest rate.

You have the facility of availing a loan against a Fixed Deposit

When you make a fixed deposit you get the option of financing the emergency yourself. You don't need to avail of a loan that is unsecured at an exorbitant interest rate. You can get a loan on a fixed deposit. A very small interest over the fixed deposit interest rate is charged for the same. So you get to keep the fixed deposit and get a loan too.

  • Fixed Deposits give you the flexibility of withdrawing funds at any time. It fails to earn interest and perhaps a penalty.
  • The fixed deposit interest earned is taxable.
  • You can choose the tenure and the amount of fixed deposit.
  • Fixed Deposit is most suitable if you are planning to invest money for a short while.
  • Fixed Deposits offer maximum stability. Market fluctuation does not affect Fixed Deposits.

How to Make Fixed Deposits?

If you are deciding to opt for FD as investment, you must first decide the tenure and the amount. It should suit your investment objective. Getting fixed deposits is easy. You can do it using mobile banking and internet banking.

What you Need to Know When you Invest in Gold?

Gold is the most sought-after possession. It is an asset and an investment that carries cultural significance in a lot of societies including ours in India. This makes sure there is continuous and unending demand for gold which rarely dips.

Investment experts advise strengthening your portfolio by considering investing in gold. It also distributes risks. The suggested percentage often ranges between 5 and 15 percent.

Consulting a competitive wealth coach is highly recommended. They help you realize what gold percentage suits your portfolio.

Gold does well when the market is low. Data suggests the price of gold has been soaring especially in the last decade. However, the gold price fluctuates frequently. Several influences such as the USD value, international trade and exchange relations, gold supply, and import duty impact the outcome. Nonetheless, the value of gold is increasing steadily.

How to Make Investments in Gold

You can buy gold in three ways:

  1. You can traditionally buy gold by getting into a gold shop. This gold can be bars, coins, and jewellery.
  2. You can buy digital gold. Digital gold is selected over the other forms of gold investments because customers don't incur making charges on digital gold. Furthermore, digital gold comes with assured purity and guaranteed safety.
  3. You can also buy paper gold. This includes gold funds, gold bonds, FOFs, and ETFs.

What are the Benefits of Investing in Gold?

There are multiple benefits that gold as an investment offers.

It protects you against any inflation risks

One aspect that can annihilate your investment is inflation. Inflation is the loss of value of money over time. You must never keep investments in cash. It has a depreciating value at least in an economy like ours. What you can do rather is invest in gold and other assets that impede the inflation risks.

It is an optimistic and promising way by which you can save money

Save money for the future because it is essential especially if you earn an income regularly. However, investing small amounts is not a possibility if you chit to do it in real estate. In such cases, you can simply invest in gold. This safeguards money for your future and you also get reasonable returns.

Buying and Selling Gold is Simple and Manageable

It is very easy to bug gold from a jewellery store nearby. Buying it from jewellers you can count on and those who give you the guarantee certificate is better. Banks also sell gold coins. What we are looking at when buying gold from prestigious sources is good quality and a proper receipt for future reference. When you are looking at liquidating the gold, your local jeweller is an easy source. You get instant cash.

Gold Requires No Maintenance

You can just lock away gold for as many years as you want and forget about it as it requires zero maintenance. This is much easier in comparison to other investments that need a lot of maintenance. For instance, if you invest in property, maintaining it will require time, effort, and perhaps money too.

Gold is One of the Top Investment Options for the Price Stability They Offer

In comparison to other investment options, the price of gold is more stable. It usually does not take a huge dip even in a crisis. On the flip side, when a crisis arises financial markets turn to gold as an investment, and prices start soaring before we realize it. When you compare gold to equity, the stock Price can very well become zero in certain circumstances. This will never be the case with gold.

Gold Can Easily be Carried Forward to the Next Generation

If you have bought gold as an investment, it can easily be passed on as an asset to the next generation. This is a tradition in countries like India. Gifting gold ornaments at weddings and other major events is quite common. Gold never loses its sheen its market value only appreciates with time.

It is Simple and Less Time Consuming to Fetch a Loan Against It

Emergencies can never be predicted in life. All we can do is be prepared financially to face them. Gold as an investment is quite reliable when it comes to situations like this since it is easily liquidated. Many financial institutions and banks provide a low against gold anytime. The rate of interest is relatively low on a gold loan when compared to other kinds of loans.

Gold Value Never Deteriorates With Time

Other investments carry the risk of deteriorating in the future however gold as an investment will not. Gold gets good returns if and when you decide to liquidate it. When it comes to jewellery made of gold, it will fetch you a good price irrespective of whether the ornaments are new or old.

  • Physical gold is a bit riskier than digital gold
  • Gold cannot generate income
  • Gold price is associated with aspects such as import duty, inflation, trade relations, etc.
  • Keeping a watch on the gold price can help in buying and selling at the most appropriate time
  • Returns generated from gold as an investment are taxable. It depends on the amount

Both investment options are low risk. You get good returns on gold if you are willing to wait for long. Fixed deposits can give you fixed returns, market fluctuations don't affect it. Having said that, you must execute due perseverance and diligence in choosing the investment options that suit your risk appetite.

FAQ

What is better, FD as investment or Gold as investment?

It depends on how you want to benefit. Gold is preferred in the long term for returns and liquidity. FDs give you fixed returns.

Is it safe to invest in an FD?

FD investments are insured. In unfortunate circumstances of the bank going bankrupt, the DICGC covers it.

Is the time right for investing in gold?

Inflation is most likely to heighten. Investing in gold is not a bad idea, it will act as a hedge.

Should we consider investing money in FDs?

Yes. It will help you diversify your financial portfolio. They also help in minimizing any risk element.