Gold Investment v/s Mutual Funds: Which One to Choose?

9-July-2021 |


India’s love for gold is evident by the fact that it is the top consumer of yellow metal globally. Historically, Greeks, Romans, Ottomans, Aryans, Egyptians, and Mayans are known to have fought over it. As part of our culture and traditions, we buy gold on various auspicious occasions. As a keeper of value, gold investment has, time and again, rescued households in times of need.


In today’s world, when you look at this asset from an investment plan perspective, it is mainly to diversify your portfolio, thereby reducing the overall portfolio risk. It is also a good hedge against inflation and various other risks. A healthy mix of assets allocated to your portfolio will lead to optimum goal-based planning. Assets such as insurance, mutual funds (equity or debt), gold, real estate, liquid funds, etc., all constitute a portfolio. Thus the question, should you invest in gold or mutual funds? Let us explore the pros and cons of these two assets.


Invest in Gold or Mutual Funds

While both the assets are recommended to be part of one’s portfolio as they both provide complementary benefits, understanding them will help you evaluate the proportion of your investment in these assets as per your requirement.




Mutual Funds

What is it?

A limited quantity of non-reactive metal found in nature. Mined and purified for its commercial value and usage in jewelry creation.

An investment product that offers exposure to a basket of equity or debt securities thereby offering the benefits of diversification.


Gold is available as a physical commodity or in digital form. The other difference is in the purity, gold is usually available as 12k, 18k, 24k .

There are several types of mutual funds all offering market-linked returns. Some are riskier than others.

How can you invest in it?

You can invest in gold as a physical commodity, gold MF, gold ETF, or as a sovereign gold bond.

You can invest in mutual funds by completing e-KYC. It can be bought without a Demat account.


  • Offers stable returns over a longer term.

  • If you invest in sovereign gold bonds you get an interest from the government. For all other types of investments in gold, there is no additional benefit.

  • A keeper of value, it has usually appreciated in the past 50 years.

  • You are eligible for dividends payout as and when the companies declare them.

  • Fluctuates with the market, therefore can take benefit in both market cycles.

  • Riskier than gold with probabilities of higher returns.


Gold investing as such does not usually attract fees. Even the expense ratio of gold ETF or MF is reasonable. However, gold in the form of jewellery/ornament has making charges.

Mutual funds are actively managed and attract a management fees.


Fairly liquid, you can liquidate gold at short notice.

Most mutual funds are liquid, and you can liquidate them within 2-3 days.

Investor Involvement

Investors don't need constant watch over gold investment. These are typically long-term investments.

Since mutual funds are market-linked, keeping an eye on markets is crucial to benefit from market cycles.


Mutual fund managers are experts who actively manage these funds.


Gold investment or mutual funds allocation depends on the risk tolerance of the investor. It is usually true that gold does not offer equity-like returns. Therefore, as an investor mutual funds offer better returns in the long term as they are market-linked. But given that gold does not lose its value over time, a small portion of your portfolio can be in gold. In times of crisis, this small portion can provide a good hedge and support the overall portfolio.


Tata AIA Life Insurance offers the best of both worlds, an insurance plan which helps you save and provides attractive market-linked returns. The Smart Sampoorna Raksha (UIN- 110L156V02) life insurance plan is one of the best investment plans in India, offering an attractive option for investors looking to add a market-linked insurance policy to their portfolio. Some of the features of this plan are:


  • Freedom to choose the premium frequency

  • Option to choose from 11 funds

  • Easy switching between funds based on market conditions

  • Eligible for tax* deductions

  • Additional riders# available


People Also Ask


Is it better to invest in gold or mutual funds?

How much gold is a good investment?

Which mutual fund should I invest in?



Need help to choose the right plan?


By submitting your details, you are giving your consent to receive SMS/Call by Tata AIA Life Insurance Company Limited or its representative, with reference to this solicited inquiry even though you may be registered on the DND list. L&C/Advt/2019/Jan/075

  • Insurance cover is available under the product.

  • The products are underwritten by Tata AIA Life Insurance Company Ltd.

  • The plans are not a guaranteed issuance plan, and it will be subject to Company’s underwriting and acceptance.

  • For more details on risk factors, terms and conditions please read sales brochure carefully before concluding a sale.

  • This blog is for information and illustrative purposes only and does not purport to any financial or investment services and do not offer or form part of any offer or recommendation. The information is not and should not be regarded as investment advice or as a recommendation regarding any particular security or course of action.

  • Please know the associated risks and the applicable charges, from your Insurance agent or the Intermediary or policy document issued by the insurance company.

  • Every effort is made to ensure that all information contained in this blog is accurate at the date of publication, however, the Tata AIA Life shall not have any liability for any damages of any kind (including but not limited to errors and omissions) whatsoever relating to this material.

  • *Income Tax benefits would be available as per the prevailing income tax laws, subject to fulfilment of conditions stipulated therein. Income Tax laws are subject to change from time to time. Tata AIA Life Insurance Company Ltd. does not assume responsibility on tax implications mentioned anywhere in this document. Please consult your own tax consultant to know the tax benefits available to you.

  • #Riders are not mandatory and are available for a nominal extra cost. For more details on the benefits, premiums and exclusions under the riders please refer to the Rider Brochure or contact our Insurance Advisor or visit our nearest branch office.