Investing In Gold vs Mutual Funds

Investing In Gold vs Mutual Funds

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Most people wonder what the best way to invest their money is, but this might be hard when you consider the many options available. You would want to invest in an asset that is stable, but you also want profit and growth. Two popular options that you can consider are gold and mutual funds.

Households in the USA place a lot of value on gold, as this is a good way to invest and pass on a legacy. It protects your wealth against inflation since it does not work the same as paper currency and has a limited supply which increases its value. Since gold is a physical commodity, it offers investors assurance.

Mutual funds are investment instruments that spread your money across different assets and are managed by a group of people. The manager purchases stocks and bonds in different companies for diversification, so if one fails, the others remain strong. 

The main difference between gold and mutual funds is that gold is a commodity, while mutual funds are a pool of money collected from investors to buy assets and securities. Let’s take a closer look at these two types of assets in the guide below.

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Investing In Gold vs Mutual Funds

Gold As An Investment 

Gold is a precious metal that is mined and purified for its use in jewelry and its commercial value. This has been a preferred choice for centuries when it comes to investments. It can be held as physical gold or digital gold, and you can invest in physical gold, gold ETF and mutual fund, or gold IRA. 

Gold is known as a low-risk-bearing investment, and it does not usually earn interest or dividends. If you’re looking for an asset that acts as a store of value rather than regular income, gold is an ideal choice. The value of gold does not depreciate even if it does not offer high returns. If you’re looking for a low-risk investment, gold is an ideal choice. 

Advantages of Investing in Gold

There are different benefits of investing in gold. Gold is a fantastic investment choice with a high potential to appreciate in the future. The asset can also be liquidated when there is an emergency, and it is a long-term hedge against inflation.

  • Hedge Against Inflation: Gold is well-known as a way to protect your wealth from inflation due to its direct relationship with it. During times of inflation, stocks and debt funds usually underperform, and paper money loses its value. On the other hand, gold performs well during inflation.
  • Diversification: A great way to diversify your portfolio is with gold. Gold is unrelated to traditional assets, so it is a convenient and easy way to diversify. With gold in your portfolio, if other assets underperform, this precious metal can prevent you from losing your money.
  • Liquidity: Gold has high liquidity, except for when you invest in a gold IRA. You can easily convert gold into cash whenever you want, as compared to other types of investments. With physical gold, you can easily sell it with a dealer, while gold ETFs and mutual funds can be sold during the course of the trading day.
  • Store of Value:  If you’re looking for a way to retain the value of your wealth, you should consider investing in gold. The underlying value of gold does not change a lot, and it is only volatile in the short term. In the long-term period, gold holds its value.

Disadvantages of Investing in Gold

There are some downsides that you need to keep in mind if you decide to invest in gold. These disadvantages might not discourage you from making this investment, but it’s important to consider all factors.

  • No Passive Income: Gold, unlike stocks and bonds, is not a passive investment. It does not earn regular income like dividends and interest. The only time you can earn money from gold is if you sell it or trade with it.
  • Storage Fees: You need to consider the storage fees if you’re holding physical gold or investing in a gold IRA. Gold has to be stored and guarded, and you might have to pay for insurance in some cases.

How to Invest in Gold 

There are different ways to invest in gold, and this versatility makes it a top choice for those who want to get started with this. You can invest in gold by purchasing physical gold, investing in gold ETFs, buying stocks for gold mining companies and opening a gold IRA.

  • Physical Gold: This is the best option for those interested in holding gold as a tangible asset. You can purchase gold from a trusted dealer and store it in a bank vault or any other safe place. Then, sell it when you want to make a profit.
  • Gold ETFs: An ETF is an exchange-traded fund, and this allows you to track the value of gold without actually purchasing the gold. You can sell and buy the gold ETFs throughout the trading day. There is also the option of gold mutual funds in which the manager purchases gold, and different investors chip in to invest in it. Well-known gold ETFs include iShares Comex Gold Trust ETF and SPDR Gold Trust ETF.
  • Gold Mining Companies Stocks: Another option is to buy stocks from a company that mines gold. While this is a good option, the value of your stocks depends on the performance of the company, and you will receive dividends. You will be given a form of ownership of their gold reserves. 
  • Gold IRA: You should also consider investing in a gold IRA, which is a specialized individual retirement account that allows you to hold gold for your retirement. You can invest in physical gold and other types of precious metals. It functions the same way as a regular IRA, but you hold bullion coins or bars instead. According to the IRS, you cannot withdraw from the gold IRA until you are 59½ years old. You will also pay income taxes on the withdrawals.
Investing In Gold vs Mutual Funds

Best Companies for Gold Investments 

There are different companies that you can work with when it comes to gold investments. You need to work with a company that buys and sells physical gold or manages gold IRAs. While there are different companies to choose from, it’s important to do your research and work with a reputable custodian.


If you want to open a gold IRA or invest in physical gold and other precious metals, Augusta Precious Metals is an ideal choice. When you start with this company, they invite you to a one-on-one web session to understand the ins and outs of investing in precious metals. You also receive lifetime customer support as you invest with them. On the downside, the required minimum investment is $50,000, which is too expensive for most people.

#2. Goldco


You should also consider working with Goldco, which also offers an IRA along with physical gold. It is an award-winning gold custodian and places flat fees on your account, so you can save money when you invest. The company offers a free beginner’s guide and is known for its constant special offers. It offers a Buy Back Program that allows you to sell your gold to the company if you change your mind.

We also recommend American Hartford Gold if you want to invest in gold and silver, although it does not offer any other precious metals. The company allows you to rollover your gold IRA for free when you’re making a minimum purchase of $10,000. The company also offers promotions and affordable fees regularly. The company has a strong buyback and price match guarantee.

Investing In Gold vs Mutual Funds

Mutual Funds As An Investment 

Mutual funds are a good way to diversify your investments across different assets, reducing your risk. When your money is in a mutual fund, you can invest in equities and debt across different industries. Since the fund is managed by a professional, you will most likely receive high returns. They also have a good track record of significant returns.

Mutual funds allow you to seek equity exposure and diversify your portfolio. Also, there are different kinds of mutual funds depending on the level of risk you can tolerate. If you have a low tolerance for risk, you can go for ultra-short-term funds or debt funds, while those who don’t mind risk can go for small-cap, large-cap and multi-cap mutual funds. If you’re not sure, you can go for long-term debt funds or hybrid funds. 

With this in mind, mutual funds are ideal for all investors. You should select the option that works best for your risk tolerance and investment objective. You can also speak with the manager of the mutual fund before you decide to invest in it. 

Advantages of Investing in Mutual Funds

There are different advantages that come with investing in a mutual fund, and this will appeal to investors. You can also find gold mutual funds, which is a fund that allows you to invest in gold through Gold ETFs or Gold Fund of Funds. They are based on gold prices and offer passive income.

  • Tax Benefits: Mutual funds allow you to take advantage of tax benefits, unlike other investment vehicles. If the mutual fund is designed to be like a 401(k), the investor will not have to pay taxes until they withdraw from the account. You might also get taxes at a low rate.
  • Professionally Managed: The mutual fund will be managed by a professional who will buy and sell the stocks and bonds. When you put money in a mutual fund, the manager will choose the assets to invest in. You won’t have to monitor the market since the professional would do so for you.
  • Wide Range of Assets: There are a lot of diversifications involved in a mutual fund. These invest in a wide range of large-company stocks, bonds and money market accounts. You get access to many investment options at a time rather than buying one stock or bond at a time.
  • Low Management Fees: Mutual funds don’t charge commissions or management fees, as you might think. Instead, you have to pay a small percentage of your profit annually. This is called a ‘load.’ The higher the load, the more fees you will have to pay.

Disadvantages of Mutual Funds

Mutual funds also have a couple of downsides which you need to consider before investing in them.

  • Fees Are Involved: When investing in mutual funds, you need to consider the fees and loads which will be deducted from your investment. The fees you pay depend on the type of fund you invest in, but the lower the fees, the lower the investment returns.
  • Little Control on Your Investment: Since mutual funds are managed by a professional, you don’t have any control over your investments. You can’t decide the types of stocks and bonds that the fund will be invested in or how much will be invested.

Why Gold Is A Better Investment Than Mutual Funds 

Gold offers an edge over mutual funds because it is resistant to inflation and is more liquid. Here are some reasons why gold is a better investment. 

  • Gold is a highly liquid asset that you can easily sell, unlike mutual funds. It also offers security and is a store of wealth. 
  • Gold is mostly unrelated to traditional assets, so it allows you to diversify your portfolio. If there is an economic crisis, mutual funds might fail, but gold will not.
  • Gold prices usually go up in times of crisis and so it is a safe asset to consider.
  • Gold is a pretty stable asset, and so the value of the investment won’t fluctuate as much as you expect. It might be versatile in the short term, but it remains stable in the long term. 
  • Gold gives you control over how you invest your money, unlike mutual funds.


Investing in gold for your retirement is an ideal choice, although you can decide between this and mutual funds. Consider your investment goals, risk tolerance and other factors before choosing between gold and mutual funds. If you’re considering your retirement, you should also keep a gold IRA in mind.