Gold vs. SIP: Where should you invest for your children's future? Which one will offer the best returns?

To secure their children's future, parents explore various investment options. Gold and SIP (Systematic Investment Plan) are two of the most popular choices. Parents typically purchase gold as jewelry to fulfill their future responsibilities towards their children. However, given the returns gold has generated in recent years, people are now also opting for investment options like gold ETFs and digital gold. If you're confused about SIP and gold for your children's future, learn about their advantages and drawbacks here to help you reach a more informed decision.

1. Benefits of investing in gold?
Inflation Hedge: Gold prices typically rise with inflation, meaning your real value doesn't decrease.
Portfolio Diversification: Gold is a non-correlated asset, meaning when the market falls, gold often rises.

Liquidity: Gold can be easily bought and sold at any time.

Low-risk asset: Gold has consistently delivered stable returns over the long term, making it a safe investment.

Global value: Gold's value remains constant in every country, making it a worldwide asset.

If you invest in SGB, you earn an additional 2.5% interest.

Drawbacks of Gold

Buying jewelry involves a making charge + GST, which increases the cost and makes gold more expensive.

Gold doesn't offer returns as high as SIPs. In the long term, SIPs have yielded returns of 12–15%, while gold often offers lower returns.

Security and storage concerns are always a concern with physical gold.

Gold only provides value when its price rises. It offers neither interest nor dividends. However, Sovereign Gold Bonds offer 2.5% interest.

Benefits of Investing in SIPs (Mutual Funds)
Equity SIPs have averaged returns of 12–15% over the long term, which is quite good compared to any other scheme. Some funds have even delivered returns of 15–18%.
If you run a SIP for your children for 10–15 years or more, compounding can multiply your funds.

SIPs fit every budget. You can start with just 250 to 500 rupees.

SIPs offer more units when the market falls, leading to long-term gains.

Disadvantages of SIPs
1. Market risk: Short-term market declines can lead to losses.

2. Discipline is essential: If you stop your SIP midway, your future fund may be reduced.

3. Risk of investing in unnecessary funds: Choosing the wrong category of funds can result in lower returns than expected.

Which is better for building a children's fund?
SIP is better for long-term goals like children's education and marriage. It offers much higher returns than gold, and due to compounding, even a small investment can create a large fund. But don't ignore gold completely.

Create the best strategy according to the 80:20 rule. This means investing 80% in SIPs (Equity Mutual Funds, Index Funds) and 20% in gold. SIPs will provide high growth, while gold will provide security. Together, they create a strong and secure portfolio.

PC Social Media