Gold vs Mutual funds vs Fixed deposit (FD): Which is better option for retirement?

One of the primary reasons for building a financial corpus is to plan for retirement. For most individuals, a regular flow of income dries up after retirement. They need to draw upon their previous investments to meet both their day-to-day needs and any emergencies. The key attribute that people look for when selecting an investment instrument for retirement funds is stability. While any returns are good, they want to be sure that their capital will be safe and carry as little risk as possible.

With this in mind, the instruments that immediately come to mind are gold, fixed deposits, and mutual funds. This is because all of them are considered low-risk relative to other investment options. But which among these is ideal for retirement planning? Read on to find out.

The ideal option is to build a portfolio that uses all the three instruments:


  1. Gold is considered a safe-haven for investors and brings stability to any portfolio

  2. Fast convertibility to cash with little additional documentation makes it ideal for times when you need emergency cash

  3. You can sell it anywhere around the world as long as you have the original purchase receipts to verify that you are the legitimate owner

  4. Though, it is important to remember that any investment in gold is subject to market risk and regulated by RBI

Fixed deposits

  1. Fixed deposit is a great option as it provides a guaranteed, risk-free return

  2. It can also be used to generate a regular, periodic income through interest payouts

  3. As the return is risk-free, it is small, and appreciation of the investment would be slow. FD interest rates are fixed based on how the economy is performing and considered the benchmark for risk-free return.

  4. Remember that if you choose to use it as a source of regular income, the investment will not grow as the FD interest rate will not compound. The interest will be paid out as soon as it is due.

Mutual funds

  1. The risk associated with mutual funds varies with the type of fund you choose to invest in. It allows you to select based on your risk appetite.

  2. The returns are also risk-adjusted. That is, a debt mutual fund that carries a lower risk also earns a potentially lower return when compared to an equity mutual fund with a higher risk.

  3. You can use mutual funds to generate some return from your portfolio,

  4. It is important to remember that mutual funds can generate a negative return when markets turn bearish. Therefore, this should not be your sole investment for retirement – though the returns will turn back up in the long run.

One of the ways to manage your post-retirement fund is to invest most of it in a chain of fixed deposits and withdraw the funds you would need for the next five years. Invest this amount in a money market mutual fund. It ensures that most of your funds are safe, and the money you need for immediate consumption is as close to cash as possible while still earning some return.

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