It is also a good time to start new things during the Festival of Lights. During Diwali, a lot of people make plans for new investments. There are many different ways to invest, such as stocks, mutual funds, fixed deposits, gold, real estate, and so on.
If you’re looking for low-risk ways to invest your money this Diwali, gold and fixed deposits are both good choices. Some people might say that gold is a risky investment because its price can drop because of things outside of its control. However, compared to stocks, gold is thought to be safer because it always has value and is a great way to protect against volatility. So, what should you choose? How do you decide which one to pick? Here are some things to think about that might help you decide.
Investing in gold
In India, Gold has been the best investment for a long time. There are times of the year, such as Akshaya Tritiya, Dhanteras, Diwali, etc., when it is thought to be especially good to buy gold. Because of this, many people wait the whole year before buying during these times.
Gold is also thought to be a good addition to an investment portfolio because it lowers the risk of the portfolio as a whole. Many investment experts say that gold or gold-related investments like gold bonds, gold funds, ETFs, or fund of funds should make up about 10-15% of a portfolio (FoFs).
Liquidity is the biggest reason why people invest in gold. Most investors are willing to put in more money if they can get their money out whenever they need to. So, liquidity is one of the most important things they look for. Any place that buys and sells gold makes it easy to buy and sell the precious metal. Also, many banks offer loans with lower interest rates if gold is used as collateral. Because of this, gold is a good way to put your money to work.
Investing in a fixed deposit
A fixed deposit (FD) is a type of investment that guarantees a fixed interest rate until a certain date. It can be opened at any bank, private or public, or NBFC. FDs offer investors a higher interest rate than a regular savings account. They also have many other benefits that make them a better investment option. FD is a good place to start investing for people who are new and don’t want to take on too much risk. FDs also help people get into the habit of saving money regularly.
A Look at Gold and FD Together
1. Risks Involved
Both gold and fixed deposits are safe ways to invest, as we’ve already said. Even though the price of gold can be unpredictable in the short term, over the long term it has always kept its value. Over the years, it has been a hedge against inflation and the loss of value in major currencies. This makes it a good investment. On the other hand, fixed deposits (FDs) offer guaranteed returns and are not affected by factors outside of the investor’s control, but again, this depends on the tenure chosen. The longer you stay, the more you get back.
2. Return Rate
Putting your money into gold can give you a good rate of return. Gold is a good investment because it has helped people beat inflation in the past. One interesting fact is that, according to a report by ET Wealth, investors who bought gold every Dhanteras for the past five years earned a 17.9% CAGR return, while investors who bought gold every 10 and 15 years earned a 10.7% and 11.9% return, respectively. The rise in gold prices over the past year has been blamed for higher returns over the last five years. Since the last Dhanteras day, the price of gold has gone up by 34%.
On the other hand, fixed deposits offer returns that are set by the bank when the account is opened. The best thing about FDs, though, is that the returns are guaranteed, no matter how much you put in. Seniors can get interest rates that are.50% to 0.75% higher than those for regular citizens.
Gold is the best choice for investors who want to buy in quickly because it is easy to sell. There are several ways to put money into gold. Digital gold, Gold ETFs, Gold mutual funds, sovereign gold bonds, and other similar investments have become popular because they give you the return benefits of gold without the risks and hassles of storage and making costs.
But the returns on gold will depend a lot on how the market is doing, so investors need to know how the market is doing before they buy or sell gold. When it comes to fixed deposit plans, your ability to get your money back depends on the bank you choose and how they handle deposits.
You can cash out your fixed deposit before it matures, but most banks will charge you a penalty interest rate. If you think you might need the money before the FD matures, look for companies that let you get out of the deal without a penalty.
4. Borrowing based on an investment
About 80% of the value of gold and FDs can be used to get a loan. You can easily get a loan against your fixed deposits and gold from banks, NBFCs, and other financial institutions at competitive interest rates that are usually lower than the interest rates on personal loans.
This year, because of the lockdown, the price of gold went up by a lot, and RBI even raised the LTV, or loan to value ratio, to 90%. So, a gold deposit of Rs 1 lakh, which used to get you a loan of Rs 60,000 to Rs 75,000, will now get you a loan of Rs 90,000.