Mutual Fund Returns vs Physical Gold Returns: Which Yields Better Returns?

[anuragmukherjee28]

So, if we had bought a one-time SIP of ₹50,000 in gold mutual funds in the year 2018 and similarly had invested ₹50,000 in buying physical gold (basically, 5 years back).

Gold Mutual Funds (For this, we are considering the data of Axis Gold Direct Plan Growth)

• 5-year return: 12.80% annualized
• Original invested amount: ₹50,000
• Total amount now: ₹91,309
• Net profit: ₹41,309

You can consider this as the maximum profit you can get. In general, it would be lower than the projected amount that I have considered .

Physical Gold

• Price of gold (5 years back): ₹29,000 / 10 grams
• Total grams bought for ₹50,000: 50,000/29,000 = 1.8 grams (approx.)
• Current price of gold: ₹62,000
• Total price of the gold now: 62,000 x 1.8 grams = ₹111,600
• Net profit: ₹61,600 rupees

So, you can clearly see that the gold mutual funds could not beat the physical gold in returns.

 

[PiyushLaxman]

I like the analysis however would be even better if you could factor in GST and avg. making charges for physical gold and reduce that from final profits to give an even more accurate comparison

 

[anuragmukherjee28]

if we consider making charges of the gold - 5% of the total gold value + 3% GST on the entire amount ( making charges and all ) , the final profits would be still be more than the gold mutual funds

 

[DadofJohnWick]

gold typically is not seen as an investment; it is seen as a hedge against equity markets.
in the short term, it is a general tendency that whenever there is uncertainty in the market; people rush towards gold as a natural hedge against equities.

in the short term, when one increases, the other decreases. but if you see over the long horizon; both tend to go up (but generally equity outperforms gold significantly)

 

[anisharya16]

Best option to invest in gold is SGB

 

[luciferocious]

if we consider making charges of the gold - 5% of the total gold value + 3% GST on the entire amount ( making charges and all ) , the final profits would be still be more than the gold mutual funds

3% gst is for purchase and not sale i think