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Stocks vs. FD vs. Gold: What is a Better Investment Option?

Trading

If your salary is your only source of income, you’re one step away from poverty.”

Thus, it is vital to have a secondary income source that can provide you with financial stability, especially when going through a rough phase. There are various investment options that can give you good returns on your capital. Stock trading, FD, and gold are the most preferred investment options. Each of these investments has its own set of pros and cons. Thus, you must be aware of all the benefits and risks associated before you put your money in them.

So, here’s a look at three commonly-used investment options – stocks, FD, and gold and how they fare against each other.

1. Stock Trading

One can easily start online stock trading even with low capital and get high returns. For instance, you can start investing in stocks with a capital of only one lakh rupees and can earn much higher returns than FD and gold investments. Stock trading can get you 12-17% returns and provide a considerable edge over others.

Moreover, stock trading provides high liquidity, a factor that is crucial for most people in the country. Whenever needed, the investment can be converted into cash by selling the stocks you hold. Lastly, stock trading provides tax benefits in various forms. All you have to do is open demat account with a registered reputed online broker.

2. FD investment

FD is a low-risk investment option. As opposed to stock trading, FD investments provide guaranteed returns on investment, irrespective of external factors. You can open an FD account at a bank, post office, or other financial institutions that are permitted to operate FD schemes.

The rate of returns on your FD investment will depend upon the invested capital, the FD tenure, and the institution where you have opened the FD account. Generally, the average rate of returns for the FD account is 4.5-5.5%. The interest rates are slightly higher for senior citizens. Still, the returns are lower compared to stock trading. But, they are guaranteed.

Lastly, investing in a fixed deposit, too, gets you income tax benefits like stock trading. You may be eligible for a tax deduction of upto INR 1.5 lakh pa as per Section 80C of the Income Tax Act.

3. Gold investment

We all know about the love Indians have for gold. It has been an investment choice of the country for centuries. There are various methods to invest in gold. For example, you can buy gold in the traditional form by buying physical gold coins, jewelry, bars, and artifacts. Moreover, you can opt for modern investment methods like gold EFTs, gold bonds, and gold mutual funds.

Although volatile in the short-term, gold provides a high rate of return, similar to stock trading, in the long run. Gold has provided an absolute return of nearly 145% in the last ten years.

Key Takeaways

Trading

Stock trading, gold, and FD are all good investment options to have in your portfolio. With the right investment, you are guaranteed to get decent returns even with high-risk investment options like stock trading. Whatever you choose, make sure you have done adequate research and understand all the risks involved with the investment method.