Is SIP better or gold? Which will give more benefit if you invest ₹ 5,000 every month?
When it comes to investment, every person’s thinking is different. Some want security, while some are ready to take a little risk for more profit. In such a situation, the question arises that if you have to invest ₹ 5,000 every month, then which option will be better – gold or SIP? Let’s understand this in detail.
Investment options – what is the specialty of which?
In India, people traditionally like to invest in gold. This has been going on for years and people still have confidence in its security. At the same time, SIP i.e. Systematic Investment Plan is a new and smart method, which is gradually gaining popularity, especially among those who want to invest for a long period.
What is SIP?
SIP refers to Systematic Investment Plan, through which an individual can invest in mutual funds, which provides the option of fixed monthly investments. Suppose, if an individual invests ₹5000 on a monthly basis into a SIP, that investment will get pooled into equity and debt instruments through the stock market.
The biggest advantage of this is the magic of compounding. That is, the money you get as interest also gets invested the next time. This makes your money grow faster.
But SIP is linked to the market, so there is also a risk in it. That is, if the market falls, your investment may also decrease. However, if you invest for a long time, then usually you get better returns than the market. Talking about the data of the past years, SIP has given an annual return of about 12%.
Why is gold a favorite investment?
In India, gold is not only associated with investment, but also with emotions. There has been a tradition of buying gold on every occasion – festival, wedding or any special occasion. People consider gold as a safe investment, especially when the market is unstable or there is a recession.
Now there are digital options for investing in gold – such as:
- Sovereign Gold Bond (SGB): Issued by the government, which also gives interest.
- Gold ETF: Investment in gold through the stock market.
- Digital Gold: Through an online platform, which stores gold in your name.
Gold has also given good returns in recent years. On an average, a profit of about 10% per annum has been seen.
What will happen if you invest ₹ 5,000 every month for 15 years?
Now let us compare with real figures. If you invest ₹ 5,000 every month and the investment period is 15 years, then how much difference is there between SIP and gold?
Investment in SIP:
- Monthly investment: ₹5,000
- Total tenure: 15 years
- Total investment amount: ₹9,00,000
- Estimated annual return: 12%
- Total profit: ₹16,22,879
- Total fund value: ₹25,22,879
Investment in gold:
- Monthly investment: ₹5,000
- Total tenure: 15 years
- Total investment amount: ₹9,00,000
- Estimated annual return: 10%
- Total profit: ₹11,89,621
- Total fund value: ₹20,89,621
Comparison result:
It is clear from these figures that SIP can give more profit of about ₹4,33,000 than gold. But remember, the profit of SIP depends on the market, whereas gold is relatively safe.
For whom is SIP better?
SIP is best for those:
- Those who can invest for a long period
- Those who are willing to take risks
- Those who want to understand the market movements
- Those who are interested in mutual funds and financial planning
For example, if a 30-year-old invests ₹5,000 every month, he can accumulate a corpus of crores by the time he retires (at the age of 60).
For whom is gold a good option?
Gold is suitable for those:
- Those who do not want to take risks
- Those who believe in traditional investments
- Those who find it easy to sell gold when needed
- Those who prefer to keep physical gold, not digital
Suppose a 55-year-old person needs money for marriage after 5 years, then he will find it safer to invest in gold.
Should there be a balance between the two?
Absolutely. A lot of investors invest in both SIP and gold. This balances the portfolio – the possibility of higher returns than the market on one hand, and the stability of gold on the other.
Suppose, you can invest ₹10,000 every month. So you can invest ₹6,000 in SIP and ₹4,000 in gold. This will give you the benefit of both risk and security.
What to think before investing?
Before investing, it is important that you identify your financial goals:
- Do you want to buy a house?
- Are you saving for children’s education or marriage?
- Do you want to create a fund for retirement?
The more distant your goal is, the more risk you can take. On the other hand, if the goal is near, then a low-risk option is better.
Also, look at your monthly expenses. Invest only the amount that you can set aside without worrying.
Conclusion: SIP vs Gold – Which is better?
If you want high returns with low risk and can invest for a long period, then SIP is better for you. But if you want to invest with security, stability and reliability, then gold can be your choice.
The most sensible way is to invest by balancing both the options.
