Gold Vs Mutual Funds - Which Is A Better Investment Option?
Written by Mariyam Sara
1 min read | Updated on October 17, 2025, 13:41 IST
Gold
Advantages of Investing in Gold
Disadvantages of Investing in Gold
Mutual Funds
Advantages of Investing in Mutual Fund
Disadvantages of Investing in Mutual Fund
Upstox is a leading Indian financial services company that offers online trading and investment services in stocks, commodities, currencies, mutual funds, and more. Founded in 2009 and headquartered in Mumbai, Upstox is backed by prominent investors including Ratan Tata, Tiger Global, and Kalaari Capital. It operates under RKSV Securities and is registered with SEBI, NSE, BSE, and other regulatory bodies, ensuring secure and compliant trading experiences.
While gold breaks records every month, catching the attention of young investors, Mutual funds offer affordable and flexible investment plans.
Let’s understand both investment options and their pros and cons so you can make informed investment decisions.
Gold
Gold is every woman's favorite, whether in the form of jewellery or an investment. And gold has never disappointed them as well. Historically, gold prices have risen, breaking records every year.
The rate of return on gold in India has been strong, with a Compound Annual Growth Rate (CAGR) of approximately 14% over 20 years and 15% over 5 years.
Advantages of Investing in Gold
Large Initial Payment
To buy gold, you need to make a significant investment.
Hedge Against Inflation & Currency Devaluation
Gold investments protect against inflation and currency devaluation. Hence, in times of economic crisis, people tend to invest in gold as it’s a safe haven for investors.
No Special Knowledge Required to Buy Gold
Buying gold is a very straightforward process, you don’t need to research or have special knowledge when buying gold.
Disadvantages of Investing in Gold
Storage & Security Charges
When you buy physical gold, you need to store it in a bank or in a safe. You may also need to insure your gold. All these storage and security charges add to your overall costs.
High Making Costs
One of the highest expenses in gold is the making cost paid to the jeweller. When you buy jewellery, you not only pay the value of gold but also the making charges.
No Regular Income
Physical gold cannot generate a regular income. You can earn a profit only when you decide to resell it.
Mutual Funds
Mutual funds are a financial investment where all the investors' money is pooled together and invested in equity and debt instruments. You can choose the mutual fund you want to invest in based on your risk appetite.
For example, if you want a mutual fund that focuses on equity, then you can go for ICICI Prudential Bluechip Funds or SBI Focused Equity Fund.
Advantages of Investing in Mutual Fund
Small Investments
You can start investing in Mutual Funds through a Systematic Investment Plan (SIP) or deposit a lump sum amount. You can make an SIP of a minimum of ₹500.
Compounded Returns
In mutual funds, the returns you earn are compounded. Meaning, let’s say you invested a total of ₹1,00,000 in a year and you got a return of 15% and now your investment has become ₹1,15,000. So this initial investment, along with the return, is reinvested, and now you will earn a 15% return on ₹1,25,000.
Diversification
Mutual funds diversify their investment to reduce the risk borne by investors.
Tax Benefits
If you choose to invest in ELSS, Equity-linked saving schemes, you get a tax deduction of up to ₹1.5 Lakhs under Section 80C of the Income Tax Act.
Disadvantages of Investing in Mutual Fund
Redemption Charges
If you sell your mutual fund units after holding them for a short period, you will be charged redemption fees.
Lock-in Periods
Mutual funds like ELSS have a lock-in period of 5 Years, before which you cannot sell your mutual fund units.
Lack of Control
Mutual funds are managed by fund managers who decide which stocks to invest in. You have no say in where your money is invested.
Additional Fees
When you invest in Mutual Funds, additional fees like administration fees, management fees, and load charges are levied on you.
While physical gold is tangible, Mutual funds are professionally managed investment tools. Both have their own pros and cons, so invest in an asset which suits your financial plans and goals.
About Author
Mariyam Sara
Sub-Editor
holds an MBA in Finance and is a true Finance Fanatic. She writes extensively on all things finance whether it’s stock trading, personal finance, or insurance, chances are she’s covered it. When she’s not writing, she’s busy pursuing NISM certifications, experimenting with new baking recipes.
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