An intelligent investor diversifies investments to not only gain maximum returns but to curb risks. Different types of assets fetch different returns and you as an investor needs to decide where to park your money based on your risk appetite and financial goals.
Here is a picture of how your investments would have fared over a period of one week, one year, 3 years and 5 years if you were to invest the same amount on equity stocks, gold, fixed deposits and mutual funds.
Notes on calculations: For the assessment, gold rates were based on physically gold sold in Mumbai historically, fixed deposits rates offered by the State Bank of India, small finance banks and Finance companies, mutual funds here means averaged returns from liquid mutual funds (money market) as specified by valueresearchonline and equity returns are based on BSE's benchmark index Sensex.
The returns are measured in absolute terms for equity, cash and gold, which means that if an investment of Rs 1,000 was made towards any of them and if it would grow to Rs 1,500, it would mean 50 percent returns in absolute terms.
Fixed deposit returns are annualized, which means that if the FD gained 21 percent over 3 years, it would be 7 percent on annualized terms. Additionally, FD rates are future based while other returns are based on past performances.
Over a period of one week:
- Equity: -0.05 percent
- Average liquid mutual funds returns: 0.13 percent
- Fixed deposit: 4 to 5.75 percent- Small Finance Banks, as well as commercial banks including SBI, provide fixed deposit facilities for a period as small as 7 days.
- Gold: -0.17 percent based on Mumbai physical gold rates
Over a period of one year:
- Equity: 19.91 percent
- Average liquid mutual funds returns: 6.84 percent
- Fixed deposit: 6.70 percent to 8.50 percent- While SBI provides 6.70 percent interest rate, Suryoday Small Finance Bank would fetch 8.50 percent.
- Gold: 1.57 percent based on Mumbai physical gold rates
Over a period of three years:
- Equity: 34.29 percent
- Average liquid mutual funds returns: 7.11 percent
- Fixed deposit: 6.80 percent (SBI) to 8.75 percent (Suryoday)
- Gold: 10.80 percent based on Mumbai physical gold rates
Over a period of five years:
- Equity: 102.8 percent
- Average liquid mutual funds returns: 7.94 percent
- Fixed deposit: 6.85 percent (SBI) to 7.75 percent (Suryoday)
- Gold: -6.94 percent
Note: The calculations do not include tax implications on gains made from any of these assets. Individual company stock gains are highly variable than the movement in Sensex which consists stocks only 30 financially sound companies.