Gold or Stocks? How to Choose the Right Investment for Your Portfolio?

When it comes to investment, there is no denying that there are multiple options. Depending on the one you choose, it has its own set of benefits and drawbacks. There are different ways to invest your hard-earned money such as fixed deposits, real estate, stocks, mutual funds, gold and so on. Possession of gold is very advantageous, you can use the gold as collateral for a gold loan and get funds you would like to invest in, to ensure you manage your finances better. 

Table of Content

• Understanding Gold Investment
• Understanding Stock Investment

However, recently in the last two decades, people have shown a keen interest in the stock market. Investing in gold has been the most common choice in India for a very long time. This could be because gold loan interest rates are often lower. 

Since the financial landscape is flexible and keeps changing depending on economic conditions. It is a good thing to try and figure out what’s right for you. On your financial journey, you will see that each asset grows differently. It is important to make the right investment decisions because your long-term goals i.e. whether saving for retirement, securing your loved one’s future, buying a home or planning for your children’s education depend on the choices you make. This blog is an attempt to help you figure out what is best, stock investments or gold?

Understanding Gold Investment

Gold has long been considered a key asset for the protection of your financial portfolio against economic uncertainties and market volatility. It has the longest history of being used as a valuable asset and also as a hedge against inflation as it tends to hold its value better than other assets.

Ways to Invest in Gold

Physical Gold

Purchasing physical gold can offer a sense of security that often comes with higher costs. You can purchase physical gold in the form of gold bars, coins, and jewellery. The costs are higher due to storage and insurance. Purchasing physical gold in the form of ornaments offers the dual benefit of investment and adornment. One major advantage of purchasing physical gold is that, it can be easily passed to the next generation as well as availing gold loan during financial emergencies.

Gold Investment Online

You can invest in gold through financial products like exchange-traded Funds (ETFs), gold mutual funds and more. A Gold ETF aims to track the domestic physical gold price. This type of investment instrument is passive and is based on gold prices. Digital gold is another option, it is a mode of investing in physical gold. Like regular gold, it can be bought online and is stored in insured vaults by the seller on behalf of the customer. Investing in digital gold consistently and in small quantities can lead to an accumulation of wealth.

Gold Mutual FundsGold Mutual Funds are actively managed mutual funds which are regulated by the Securities and Exchange Board of India. This type of investment is ideal for investors who want to diversify their portfolio.

Understanding Stock Investment

Stocks are a type of security that gives you ownership share of the company in fractions. This type of investment represents ownership in publicly traded companies and is a popular choice among the people. When you buy stocks of any particular company, you are investing in the future success of that particular company. Being a shareholder, your returns depend on the company’s performance. 

Investors will have a chance to earn a profit if the price of the stocks in their portfolio increases, while they lose money if they sell stocks for a lower price.

How do you Invest in the Stock Market?

Individual StocksBefore investing in stock, it is wise to carry out research on the financial health and market conditions associated with the company. Buying individual stocks is a good way to start investing and diversify your portfolio. However, this approach comes with the risk of significant losses in case the company underperforms and offers the potential to reap high profits when the company performs well.

ETFsExchange-traded funds allow you to invest in a basket of stocks, providing instant diversification. This type of investment allows you to buy many individual stocks to track an underlying index. ETFs also provide greater diversification than owning an individual stock.

Stock Mutual FundsThis type of investment shares certain similarities with ETFs, but there are some key differences that you should be aware of. For instance, actively managed mutual funds have managers who pick different stocks in an attempt to beat a benchmark index.

Suggested Read: Common Mistakes to Avoid When Monitoring Share Prices

You need to carefully consider the unique characteristics and risks of investing in both gold and stocks. Making informed decisions that align with your financial goals is something that you can play on your part. Whether it is stock investment or gold, with Muthoot Finance invest in a bright future for your family.