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Gold vs Equity

Investing in Gold or Equity

Which suits you best?


Key Benefits on Investing in Gold

Key Benefits on Investing in Gold

⇒ Investing in physical gold is easy

⇒ Over the long-term, gold investments have given high dividends

⇒ Gold can be converted into jewelry and ornaments for personal use

⇒ Gold can be easily mortgaged for availing loans


Key Benefits on Investing in Equity

Key Benefits on Investing in Equity

⇒ You can diversify your risks by investing in various avenues

⇒ Potential to earn relatively high returns

⇒ High liquidity

⇒ Investors can start with amounts as less as Rs. 1000 (for mutual funds)

⇒ Money is handled by professional fund managers (for mutual funds)

⇒ Efficient post-tax returns

⇒ Long term capital gains (over 1 year) are tax exempt


Drawbacks - Investing in Gold

Drawbacks - Investing in Gold

⇒ Gold prices are coupled with several macro-economic factors

⇒ Less transparency while buying and selling physical gold

⇒ Cost of storing and maintaining gold is high and poses security risks

⇒ There are no tax advantages for gold investments

⇒ No regular income in the form of dividends or rent


Drawbacks - Investing in Equity

Drawbacks - Investing in Equity

⇒ High risk and high volatility in the short-term

⇒ Difficult to pick stocks

Gold investment vs Mutual Fund investment' Debate

Gold investment Mutual Funds
Definition Gold is a precious metal that has always been highly valued in the market and works as good as the paper money Mutual Fund is a complex financial product that works by investing the investor's funds in equities, debts and other money market instruments
Category Gold investment is an investment asset as well as a functional commodity Mutual fund is a pure form of investment
Management The investment is made and managed at the sole discretion of the investor The investment is professionally managed by money market experts
Strategy Investment can be divided into physical gold and gold ETFs but that is, more or less, the same thing. There's no diversification involved. Mutual funds involve diversification of portfolio through investing in a variety of securities
Risk Involved Storing and carrying around gold involves risk of theft and burglary. However, there's no such risk in gold ETFs No such risk is involved in mutual funds. As a matter of fact, mutual funds can be bought and sold online
Trading Buying and selling gold involves
☛ no charges
☛ no intermediary
☛ no documentation
Buying and selling mutual funds
☛ involves intermediary
☛ incurs entry and exit charges
☛ requires documentation
Returns Gold does not encash the highs of the market. It doesn't earn anything and doesn't pay any dividends. Mutual fund ride both the bull and bear to yield substantial returns to the investor.
Variants Gold is gold there are no types to it, except for the quality parameter, implying that 24K gold is always costlier than 22K gold Mutual Funds have many variants to it based on the kind of funds. So it becomes very important that you go for a right mutual fund suiting your investment appetite
Liquidity Gold is an asset with a high liquidity. It is can be traded with anyone anywhere Mutual funds are quite liquid as well, enabling you to cash your funds at the current Net Asset Value. However, they are saleable only in a specific segment of the market. You can't sell it to anyone anywhere
Investment Cost At a whopping price of 26,320 per 10 gms, (as on the date this article was published) one needs to think twice before investing in it. Even, the minimum investment that has to be made to start with is quite high. Investing in mutual funds is quite affordable and flexible. The amount you want to invest depends on the number of units you can afford to purchase. The minimum investment can start from as low as Rs 1000
Market Knowledge There's no need to be vigilant while investing in gold. Even a not-so-smart investor is able to get substantial returns, provided he/she invests it for a long term Investing in a mutual fund needs you to be on your toes all the time. Only a smart investor with a know-how of money market can make his/her way to profit through mutual fund
Stability Gold is not resistant to the market fluctuations. But, no matter, how bad it might look, it's value tends to always go up in the long run. Mutual fund is a highly dynamic financial product that keeps on riding the lows and highs of market and thus is nowhere near to be called as stable investment avenue

Warren Buffett - How Much Gold Is There in the World?

In his excellent investing primer in Fortune Warren Buffett devotes a few paragraphs to gold and the fools who worship it.

He also explains why gold is generally a crappy investment, even if its price in dollars goes up from time to time (as it has over the past decade). If you molded all the gold in the world into a cube, Buffett says, it would be about 68-feet per side. This is four feet shorter (and considerably wider) than a tennis court. As Buffett observes, it would fit comfortably in the middle of a baseball infield.
The value of all that gold at today's prices, Buffett observes, would be about $10 trillion.


Warren Buffett - How Much Gold Is There in the World?

As for its Merit as an Investment, Buffett observes the following:

• The cube of gold will produce nothing in the next hundred years (or, for that matter, thousands of years).
• The cube of gold will not pay you interest or dividends, and it won't grow earnings.
• You can fondle the cube, but it won't respond.

If you had $10 trillion sitting around, Buffett further observes, instead of buying the cube of gold, you could buy all the cropland in America ($400 billion-worth) and 16 Exxon-Mobils. And you would still have $1 trillion of "walking-around money."
Over the next hundred years, your cropland and Exxonmobil's would produce trillions of dollars of dividends (the size of which would be adjusted for inflation), and you would still have them at the end of the century, at which point you could probably sell them for vastly more than the $9 trillion you bought them for.

So, which investment would you choose?

The Gold Tree
The Gold is used in Different Fields


The Gold Investment Tree Infographic