SBI 5-year FD vs Physical Gold: Which investment has given higher return on Rs 5 lakh investment in 5 years; see calculations
Investors use the 5-year fixed deposit (FD) as a long-term investment instrument. Here, they can park their money for 5 years, earn interest on it, and get the maturity amount on the completion of the FD. Physical gold can be bought in the form of jewellery, gold bars, and biscuits.
SBI 5-year FD vs Physical Gold: Investors use physical gold and fixed deposits as long-term investment tools. Though both are different types of investments, investors believe that both can give steady returns in the 5-year horizon. While fixed deposits provide a fixed return, the rate of gold can fluctuate. However, investors believe that the yellow metal's price will grow in the long term. In this write-up, we will draw a parallel between gold and SBI 5-year FD returns in 5 years and will show which of them has given higher returns during that period.
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How FD works as investment tool
Investors use the 5-year fixed deposit (FD) as a long-term investment instrument. Here, they can park their money for 5 years, earn interest on it, and get the maturity amount on the completion of the FD.
How FD works as investment tool
The benefit of investing in a 5-year FD is that the investor also gets tax benefits up to Rs 1.50 lakh under Section 80C of the Income Tax Act, 1961.
How FD works as investment tool
Investors with a low-risk appetite and those seeking guaranteed return invest in a FD scheme. They make a one-time investment and get return in the form of interest. They can get this interest on maturity, monthly, quarterly, half-yearly, or yearly. Senior citizens use FD as an effective tool to get regular income in their retirement life.
How gold works as investment tool
Physical gold can be bought in the form of jewellery, gold bars, and biscuits. People use gold as an investment tool for different reasons. Some use it for the diversification of their portfolio; risk-averse investors invest in gold as its price is not very volatile in the short term; some use it as a hedge against inflation.
How gold works as investment tool
An important factor with gold is that the pure form of gold can be converted into cash globally.
Factors that affect gold rate
Some major factors that can affect gold prices are demand and supply, inflation, the global gold price, economic conditions, and demand for gold jewellery.
SBI Interest Rates on October 7, 2019
State Bank of India was offering an interest rate of 6.25 per cent in its 5-year FD for general citizens 5 years ago.
Gold rate on October 7, 2019
Gold's rate (22 karat gold) 5 years ago in New Delhi was Rs 3,735/g.
Return on Rs 5 lakh investment in SBI 5-year FD
Had one invested Rs 5 lakh in SBI 5-year FD on October 7, 2019, the estimated maturity value of their investment today (October 7, 2024) is Rs 6,81,770.
Return on Rs 5 lakh worth gold investment in 5 years
At Rs 3,735/g, one would have purchased 133.86 grammes of gold 5 years ago. Gold's rate today is Rs 7,115/g. So, the estimated worth of Rs 5 lakh investment today is Rs 9,52,413.9.