Gold vs SBI FD: Which has given higher return on Rs 1 lakh investment in 20 years?
Physical Gold vs SBI 5-Year FD: As per BankBazaar.com, the gold rate of 10 grammes of 24 carat gold in the year 2004 was Rs 5,850. In today's time, it stands at approximately Rs 74,155. It means it has increased by 1167.61 per cent, or nearly 12.50 times in 2 decades. In terms of CAGR, it is 13.54 per cent.
Physical Gold vs SBI 5-Year FD: Gold is an evergreen investment in India. Its lustre never fades. As an ornament, or as a source of investment, people flock to buy gold, in physical form as well as digital form. Whenever the share market is down, investors most likely start buying more gold as they consider it a safer investment amid market fluctuations. The Fed's recent indication that the interest rates may go down has sparked interest in gold investment as the metal's price is rising at the international market.
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What are FDs?
On the other hand, fixed deposit (FD), is also a popular investment tool for decades in India. Investors who don't want to take market risk invest their money in FDs or similar investment tools. FDs provide guaranteed return and steadily increases the value of investments. Senior citizens who seek monthly income also use FDs to park their money.
FD interest rate
FD interest rates vary from scheme to scheme. Banks and small banks offer more interest rates to senior citizens compared to general citizens. In the long run, both gold and FDs appreciate the value of an investment.
In this write-up, we will show you how Rs 1 lakh invested in gold and the 5-year SBI FD 20 years ago (August 2004) has turned into in present time.
Gold historical rates
As per BankBazaar.com, the gold rate of 10 grammes of 24 karat gold in the year 2004 was Rs 5,850. In today's time, it stands at approximately Rs 74,155. It means it has increased by 1167.61 per cent, or nearly 12.50 times in 2 decades. In terms of CAGR, it is 13.54 per cent.
SBI 5-year FD rates in 20 years
Since FD rates are not static. Banks change them time to time. Also, bank don't offer FDs for 20 years. So, we have taken here 5-year FD as the standard investment (Source: SBI official website).
SBI 5-year FD rates in 20 years
We are showing 4 blocks of 5 years each, present an overall picture of 20-year investment in the 5-year SBI FD. Here we are showing historical 5-year SBI FD rates after every 5 years, starting from August 2004.
SBI 5-year FD rates in 20 years
August 2004- 5.25 per cent
August 2009- 7.50 per cent
August 2014- 8.50 per cent
August 2019 - 6.50 per cent
August 2024- 6.50 per cent
Thus, the average growth of the 5-year SBI FD in the last 20 years is 6.85 per cent annually.
Current value of Rs 1 lakh investment in gold in August 2004
At Rs 5,850/10g, with Rs 1 lakh, one would buy 170.9 grammes of gold in August 2004.
The current value of 170.90 gramme gold is Rs 12,67,308.95.
Current value of Rs 1 lakh investment made in SBI 5-year FD in August 2004
Since 6.85 per cent has been the average annual growth of 5-year SBI FD in 20 years, a Rs 1 lakh investment in that time frame has swelled to Rs 3,88,997.
How much extra return has gold given?
The estimated extra return that gold has given compared to SBI 5-year FD is Rs 8,78,311.95.