Gold and fixed deposits are considered as the two popular sources of utilizing your idle funds for the investments. If you are an investor, who has the appetite to handle the risks, then you can invest in gold, whereas an investor who wants the guaranteed returns on their investments should certainly invest in a fixed deposit.
What is a Fixed Deposit (FD)?
A fixed deposit is an investment scheme where you invest your funds for a fixed tenure ranging from 7 days to 10 years at a fixed rate of returns.
Gold Investments in India:
Gold, the precious yellow metal is considered an auspicious metal in India. You can invest in a gold asset in various forms such as buying jewelry, coins, bars, gold exchange-traded funds, Gold funds, sovereign gold bond scheme, etc.
Reasons Why You should choose a Fixed Deposit over Gold?
The prices of gold constantly fluctuate, as the prices are determined internationally based on the price of the dollar. Thus, the returns on the gold are dependent on the demand and supply of gold in the market. On the other hand, the interest rate on the fixed deposits is not reliant on the market and is determined based on the RBI repo policy, etc. Thus, the returns on the fixed deposits are fixed and don’t fluctuate rapidly.
Rate of Return:
With the import of gold in India, there has been gold inflation in our country. While the government is taking measures to control inflation, it has only led to the fall in gold prices negatively; however, the fixed deposits offer guaranteed returns for fixed investment tenure.
To claim tax deductions on your fixed deposits, you must invest in a 5-year tax-saving fixed deposit. Under Sec 80 C of the income tax act, you can claim tax deductions up to Rs. 1. 5 Lac on these term fixed deposits. However, you cannot withdraw these funds before the lock-in period of 5 years.
Without a doubt, gold investments offer high liquidity as you can sell your physical gold very quickly. However, as the price of the gold fluctuates continuously, thus you may suffer losses if the current prices have declined. On the other hand, you can withdraw the funds from your fixed deposits account after a certain period without any loss.
Both gold and fixed deposits offer a flexible mandate for investment. You can invest in the two investment options on a short term or long term mandate depending on your requirements.
You can choose to receive the interest earned on your fixed deposits using cumulative and non-cumulative methods. In a cumulative Fd, the interest is paid at the end of the maturity period and compounded annually. The interest is compounded monthly, quarterly or annually as per the choice of the investor in a non-cumulative fixed deposit. To increase the savings in your FD account, you can invest in a cumulative FD scheme.
Loan Against Investment:
You can get credits against the gold asset and fixed deposits at a lower rate of interest than the personal loans from banks and non-banking institutions.
Thus, investing in fixed deposits can be considered a safer form of investment to get the guaranteed returns on your investments than investing in gold, which fluctuates continuously according to the market.
Summary: Gold and fixed deposits are considered as the two popular sources of utilizing your idle funds for the investments. If you are an investor, who has the appetite to handle the risks, then you can invest in gold, whereas an investor who wants the guaranteed returns on their investments should certainly invest in a fixed deposit.