Gold or Fixed Deposit: Which is the better investment option?

  • Deposit
  • 20 Days ago

Written by - Shriram

A Fixed Deposit (FD) and a gold investment are considered low-risk investments as they ensure returns, making them popular schemes. An FD offers assured returns which are not impacted by market fluctuations. You can take a loan against gold for up to 80% and against an FD for up to 90% of the deposit amount. With a fixed deposit, you also have the option of a flexible tenure to make investments that suit your requirement.

A fixed deposit is similar to a gold investment in that both are considered risk-free. However, the investments made in gold will have constant fluctuations as prices fluctuate depending on factors such as geopolitical tensions, the value of the rupee, and the demand and supply. In this way, an FD is more secure because you will get assured returns upon the maturity of your deposit.

A Shriram FD will help your hard-earned money grow effortlessly for a safe and secure future. Returns on a Shriram FD do not change with the market or external factors. In times of any emergency, you can easily withdraw the deposit amount from your fixed deposit account partially or wholly to support your requirements.

Both gold and FD are great investment options that enable you to achieve your financial goals securely. Understanding their similarities and differences can help you decide which is the best investment for you.

What is a Fixed Deposit?

A fixed deposit is a financial scheme that allows you to invest a lump sum of money at a guaranteed fixed interest rate until maturity. You can open an FD with any bank or Non-Banking Finance Company (NBFC) of your preference. An FD is the best investment for individuals new to the concept of investments. You get a comparatively higher interest rate in an FD account than in a savings account. FDs also help you to inculcate a healthy habit of dedicated savings.

Open a Shriram FD now to avail of higher interest rates on your fixed deposit. You can earn a monthly income through a non-cumulative fixed deposit with Shriram. You can efficiently achieve your future goals with flexibility in tenure and investment amount. Check the Shriram FD interest rates to know the exact rate of interest you can get for your deposit.

What is a Gold Investment?

Gold has been India's most common means of investment for centuries. To invest in gold, some auspicious days in a year, like Dhanteras, Diwali, Akshaya Tritiya, etc., are considered very prosperous and beneficial. Besides the cultural value, gold is also considered a great addition to an investment portfolio since it reduces the portfolio's overall risk. An investment portfolio refers to all kinds of investments held by a person.

The most significant advantage that comes with investing in gold is its liquidity. Liquidity is the ability to turn your investment into cash. Many people are willing to invest more if they have the flexibility to withdraw their funds whenever they need. These factors and others make gold an excellent option for investments.

Key Differences Between a Fixed Deposit and a Gold Investment

Comparing a fixed deposit and a gold investment will help you better understand the schemes. Let's look at some essential factors you need to consider before investing.

Rate of Return:
  • Fixed Deposit- A fixed deposit scheme has a stable rate of returns. This is because the returns are guaranteed at a pre-determined interest rate for a specified tenure. Senior citizens can get a higher interest rate on their deposits, ensuring higher returns.
 
  • Gold - You can get a reasonable rate of return from a gold investment. Due to inflation in the market over the past few years, the price of gold has fallen. This fall in price means the rate of returns has been lowered. Usually, this is how the rate of returns on gold investment changes according to the market.

Risk Factor:
 
  • Fixed Deposit - External factors do not impact a fixed deposit. The returns depend on your choice of tenure and investment amount. A long-term fixed deposit will yield higher returns.
 
  • Gold - As mentioned earlier, gold is a low-risk investment. Gold's price may change significantly over the short term, but it has proved valuable in the long run. Gold is a barrier to inflation, and currency fluctuations make it a valuable investment.

Loans against Investment:
 
  • Fixed Deposit - An FD can be used to take a loan, and this sort of loan will be considered an overdraft. An overdraft is the ability to withdraw money from an account even if there is no balance. You will be unable to avail of the funds from your FD if you have taken a loan against it.
 
  • Gold - You can take a loan against gold, but there are a few specific rules and regulations before taking the loan. You can only avail of a loan of about 80% of its total value. The interest rate for such a loan will be lower than a personal loan.

Liquidity:

  • Fixed Deposit - You can liquidate an FD as well. However, there may be a penalty charged for pre-mature withdrawal as an FD is supposed to be locked in till the day of maturity. You can always choose a non-cumulative FD to earn the interest periodically so you can use it without breaking the deposit.
 
  • Gold - One of the most attractive features of investing in gold is its ability to be quickly liquidated. Gold can be invested in several ways like digital gold, gold mutual funds, sovereign gold bonds, etc. This investment has become popular as they give similar benefits to gold without the hassle of storing and making costs.

Tenure Flexibility:

  • Fixed Deposit - When considering tenure, an FD is an investment that offers a flexible term. Except for tax-saving FD, which requires a 5-year deposit, you can select any period between 7 days and 10 years for your investment. This flexibility may also depend on the financial institution you invest in.
 
  • Gold - The gold investment duration depends on your scheme choice. With gold investments like gold equity or gold bullion also, the term depends on the type of investment you are making.

Income Tax:

  • Fixed Deposit - The interest earned on a fixed deposit is fully taxable. With a tax-saving FD, you can save on taxes and make your investment secure. The tax on an FD will only be charged according to the income tax slab you belong to.
 
  • Gold - The income from the interest of gold investment is classified as Capital Gains. This enables you to avail of the indexation benefit. Indexation is used to adjust the purchase price of an asset to reflect the effects of inflation on it. A higher purchase price means lesser profits, which means lower tax.

Which Investment Option is Better?

While a gold investment is a popular option, an FD is the most secure way to invest your money. You do not have to worry about market fluctuations with a fixed deposit. Apart from a flexible tenure, there are many types of FDs you can avail of according to your preference and financial goals.

With just a few clicks, you can open a Shriram FD online and invest your hard-earned money for assured returns at a great interest rate. Shriram's fixed deposit comes with the rating of "[ICRA]AA+ (Stable)" by ICRA and Rated "IND AA+/Stable" by India Ratings and Research (Indicates a high degree of safety), which indicates high credit quality. Use the Shriram FD calculator now to check the exact amount you can get for your investment.

FAQs

1. Can I keep gold in the bank as FD?

Yes, some financial institutions allow you to keep idle gold in an FD to earn interest.

2. Which is better for investment, a fixed deposit or gold?

The returns on a gold investment depend on market fluctuations. Interest rates on an FD are not impacted by the market, making it one of the most secure investments.

3. How safe is FD than other investments?

A fixed deposit is not impacted by market fluctuations and has guaranteed returns. These factors make it one of the safest investment options to consider.

Key Highlights:

  • Both FD and gold are low-risk investment options.
  • Market fluctuations do not impact a fixed deposit.
  • You can take a loan on both investment options, but for gold, you can only take up to 80% of the deposit. For a loan against an FD, you can take up to 90% of the deposit.
  • An FD offers a flexible tenure for you to be able to make investments that suit your requirements.