FD vs. Gold- Which is Better for Investment in India?

FD vs Gold

When a risk-averse investor looks for a low-risk investment avenue, Gold and Fixed Deposits are in the top priorities. There are various parameters that help to select one of these two as per the financial goals of an investor. It is extremely important to decide on the right investment avenue as per financial objectives.

Comparative Analysis

Following is the comparative analysis to understand both investments that will help investors to make decisions for their capital allocation. 

1. Tenor

You can invest in gold through ETFs, gold equity, and gold bullion. The tenor of the investment will depend on the type of investment you choose. Whereas fixed deposit is a flexible investment that brings stability to an investment portfolio. You can open a fixed deposit account with Bajaj Finance for 12-60 months which is flexible enough tenor for every investor whether he/she has short term horizon or long term horizon. In case you keep on investing in gold investments, it will attract long-term capital gains. On the other hand, if you auto-renew Bajaj Finance fixed deposit, you will be rewarded with an additional interest rate of 0.10%.

2. Market Nature

Gold is an internationally traded commodity, therefore expect a heavy impact of dollar value, import-export duty, international trade relations etc. on the gold prices and your returns will be impacted. There is the uncertainty of price fall/gain, hence it may be proved a risky investment. On the other hand, you will be assured about returns on your fixed deposit account at the fixed rate of interest, no matter how the market is performing. With CRISIL’s FAAA/Stable rating and ICRA’s MAAA/Stable rating, Bajaj Finance FD assures you of guaranteed returns on your investment, irrespective of market conditions.

3. Rate of returns

Gold investments offer inflation-beating returns but at a level of risk. Gold inflation affects investment related to gold. On the other hand, fixed deposits provide guaranteed returns at a predetermined rate of interest which is fixed for the entire tenor of an FD. FDs are the benchmark for guaranteed returns. In India, FD interest rates are ranging between 4 – 6% with different banks. If you want to earn interest at a higher rate, consider Bajaj Finance Fixed Deposit offering interest rates up to 7.25% along with various interest rate privileges for their customers.

4. Income Generating Avenue

With fixed deposits, investors can receive regular interest payouts. It can be monthly, quarterly, half-yearly or annually based on the investor’s choice. On the other hand, Gold is just an asset to invest in and does not generate any income. Bajaj Finance Senior Citizen FD offers an attractive higher interest rate i.e. up to 7.25%. You can open a FD account online which is very convenient for senior citizens. There are no special benefits available on gold investments for senior citizens.

5. Liquidity

Gold and gold-related investments like a mutual fund, bullion and equity are considered as the liquid investments which can be converted into cash quickly that makes it a great option to invest for times of need like emergency cash. But you may have to accept a lower cost for your investment if you sell it for an emergency fund and a genuine buyer is not available.

Whereas you can withdraw a fixed deposit in the times of need and still, your principal amount will not be affected. However, you will be liable to pay a penalty for premature withdrawal. To avoid such penalties, one can apply for a loan against the deposit with the easy terms. With FD Investment, one can get a loan of up to 75% of an FD value.

6. Alternative Source of Income

Fixed deposits are the source of income, especially for senior citizens who are dependent on FD interest. As they have the option to receive interest periodically with a non-cumulative FD. They can opt for receiving monthly interest also. Gold is not productive on its own. It may or may not generate income as it is completely influenced by external factors.

7. Term Flexibility

Term flexibility of Gold depends on the type of investment you choose to invest in — gold ETFs or gold equity. On the hand, fixed deposits are more flexible and help you to meet your short term goals also. With Bajaj Finance FD, you can invest for 12-60 months and earn a fixed rate of interest of 7.2% for below 60 years of age and 7.35% for senior citizens.

8. Taxes

Returns from gold investments may be taxed heavily, depending on your income, and returns. Interest on Fixed deposits is fully taxable but there are sections available for exemptions in taxes. One can invest in tax saving fixed deposits also.

9. Safety

Gold investments are subject to market forces that can affect the gold prices adversely whereas fixed deposits are popular as risk free investing tools because of the fixed rate of returns without being affected by the market forces.

The most reliable investment avenue fixed deposits offer regular income, safety to principal and interest as well, savings of taxes and the list of its benefits goes on. FD rates in India may be lower but have the credibility to fulfill your short term and long term goals without any loss. You can compare the FD interest rates offered by various banks and NBFCs like Bajaj Finance to ensure the higher returns. Bajaj Finance FD is offering higher FD rates in India as compared to banks i.e. up to 7.35%. Moreover, it is rated for its safety and stability by reputed third party agencies such as CRISIL and ICRA.

Conclusion..

Hope, you are able to compare the two thoroughly to make a decision on how to invest money efficiently. While choosing an investment, keep in mind the impact of price fluctuation on the investment due to market volatility.

Gold and fixed deposits are the two most preferred investment options in India when it comes to risk-averse investments. However, there are many differences between them when it comes to their features and other benefits. For example, FDs offer a more flexible tenor than gold investments and are more stable since your deposits remain unaffected despite of the changing market conditions.

Though gold investments fall in the category of liquid investments, you might have to compromise with a lower value in case you want to sell them immediately. The rates of  FDs are high enough to generate good income and also provide easy liquidity options and loan up to 75% of the FD value. Therefore, you can definitely consider it if you wish to invest in fixed deposits.