Mutual Funds Vs. Other Investment Options
Types of Investments
There are many traditional different Investment options available from which most considered investment options are enlisted below with some of their myths and facts.
PPF
Public Provident Fund is the most common investments made by middle class but for returns you have to wait till retirement.
Bank Deposits
Bank Deposits are the most safest but generates lowest returns. In some cases it doesn't even beats the inflation rate.
Gold
Gold is safe and has appropriate returns but so much chances of getting looted in Gold Investments.
Life Insurance Investments
Life Insurance Investments has negligible returns and in some cases or many time it gets rejected.
Bonds
Bonds generate good returns but top rated bonds are not easy available and tough to track the bond market.
Direct Equity Shares
Direct Equity Shares can generate you an unbelievable returns but in many cases people loose their capital too.
Mutual Fund Vs. Bank Deposits
Drawbacks of RD & FD
Premature Withdrawal – If you withdraw or close an RD before it’s due, you might not get any interest or you might be charged a penalty.
Fixed Installment Amounts – You can’t change the amount you want to invest each month.
Lower interest rates – RDs usually have lower interest rates than other types of investments like fixed deposits.
Taxation – Interest earned on RDs is taxable and taxes are deducted at the source.
Not a Tax-Saving Tool – RDs aren’t considered a tax-saving investment.
Mutual Fund Vs. Bank Deposits
| Monthly | Tenure | Rate of Interest | Total Amount |
|---|---|---|---|
|
Rs. 5000 |
15 Years |
7% |
Rs. 16 Lakh |
|
Rs. 10000 |
15 Years |
8% |
Rs. 20 Lakh |
Mutual Fund Investment Instead of Bank Deposit :
| Monthly | Tenure | Rate of Interest | Total Amount |
|---|---|---|---|
|
Rs. 5000 |
15 Years |
12% |
Rs. 25 Lakh |
|
Rs. 5000 |
15 Years |
15% |
Rs. 34 Lakh |
|
Rs. 5000 |
15 Years |
18% |
Rs. 46 Lakh |
Mutual Fund Vs. Gold Investment
Disadvantages of Gold Investments
Storage And Security Costs – Storing physical gold can be expensive, especially if you have a significant amount. You might need to invest in secure storage facilities.
Risk of Theft – Given its high value, physical gold can be a target for theft. Safeguarding gold against theft can require additional security measures and can be a cause of concern especially if you are storing it in your home.
Illiquidity – Physical gold can be relatively illiquid compared to other forms of investment. If you need quick access to cash, selling physical gold might take time especially if you are looking to get a fair market price.
Price Volatility – Gold prices can be highly volatile, affected by various factors such as market sentiments, economic indicators and geopolitical events.
| Year | Rate | Gram | GST | Making Charges | Total Amount |
|---|---|---|---|---|---|
|
2022 |
Rs. 50000 |
100gm |
3% |
15% |
Rs. 5.92 Lakh |
|
2024 |
Rs. 66000 |
100gm |
NA |
NA |
Rs. 6.6 Lakh |
Mutual Fund Investment Instead of Gold :
| Scheme Name (On 2022) | Investment Amount | Current Value (On 2024) | Annual ROI |
|---|---|---|---|
|
HDFC Balance Advantage G |
Rs. 5 Lakh |
Rs. 8.3 Lakh |
28.93% |
|
SBI Flexi Cap G |
Rs. 5 Lakh |
Rs. 7.35 Lakh |
21.58% |
|
Gold |
Rs. 5 Lakh |
Rs. 6.6 Lakh |
16.89% |
How Mutual Funds are better than any Life Insurance?
Life insurance, particularly traditional or endowment plans, often falls short when compared to mutual funds as an investment vehicle due to several key drawbacks. The returns from life insurance are relatively low (typically 4–6% annually), as the primary focus is on providing risk cover rather than wealth creation. These policies come with high premiums, hidden charges, and limited liquidity due to long lock-in periods, making them inflexible and costlier in the long run. Also the investment portion of such policies may be inadequate for actual financial goals, and the sum assured may not offer sufficient life cover. In contrast, mutual funds provide higher returns, better transparency, greater flexibility, lower costs, and are more aligned with both short-term and long-term financial planning, making them a superior choice for wealth accumulation.
Mutual Fund Vs. Life Insurance Investments
| Monthly | Tenure | Total Investment | Rate of Interest | Total Amount |
|---|---|---|---|---|
|
Rs. 2000 |
22 Years |
Rs. 5.28 Lakh |
12% |
Rs. 25 Lakh |
|
Rs. 2000 |
22 Years |
Rs. 5.28 Lakh |
15% |
Rs. 34 Lakh |
|
Rs. 2000 |
22 Years |
Rs. 5.28 Lakh |
18% |
Rs. 46 Lakh |
Mutual Fund Investment Instead of Bank Deposit :
| Heading | Life Insurance | Mutual Fund |
|---|---|---|
Tenure |
15 Years |
7% |
Fix Monthly Amoount |
15 Years |
8% |
Surrender |
Loss of Premium |
No |
Loan |
Yes, (Charges Interest) |
Yes (No Charges) |
Partial Withdrawal |
No |
Yes |
|
Closed |
Yes, With Loss of Premium |
Yes, With No Loss |
|
Monthly Amount (Increased/Decreased) |
No |
Yes |