India’s retail investors face a clear choice: traditional safe-haven metal or systematic equity investing via SIPs (systematic investment plans). Both have distinct roles in a portfolio, but when judged by recent flows, returns and policy context, SIPs have clearly been gaining the upper hand while gold remains a strategic hedge. Below is a comparison of the two across performance, liquidity, taxation and behavioural fit for Indian investors.
Recent market context
The mutual fund industry in India recorded a substantial expansion in FY25, with assets under management reaching a record ₹65.74 lakh crore at end-March 2025. This is a sign of sustained retail participation and strong net inflows into equity schemes. Equity mutual funds, in particular, saw unprecedented net inflows in FY25 (about ₹4.17 lakh crore), underscoring how SIPs have become the dominant retail route to equities.
Monetary policy has also become more growth-friendly. The Reserve Bank of India eased policy in 2025, cutting the repo rate and injecting liquidity, creating a tailwind for risk assets and an incentive for flows into equities. Lower policy rates typically reduce the opportunity cost of holding equities and can lift consumer and corporate activity, improving earnings prospects.
Total returns and volatility
Historically, gold preserves purchasing power and performs well during currency weakness or systemic risk. Gold’s price in rupee terms has delivered strong long-run nominal gains across decades, but those gains are lumpy and often concentrated in episodes of stress or high inflation. Recent multi-year comparisons show that while gold provided capital protection during market panics, equity indices (and equity mutual funds accessed via SIPs) have outperformed over long horizons when measured by compounded annual returns.
SIPs benefit from rupee cost averaging. Regular monthly investments into equity funds smooth the impact of volatility and capture market growth over cycles. Therefore, for investors with a long investment horizon (7 to 10 years and beyond), SIPs into diversified equity funds typically deliver higher expected returns than gold, although they may involve higher short-term volatility.
Liquidity, instruments and taxation
Gold can be held physically, through ETFs, or via Sovereign Gold Bonds (SGBs). SGBs offer the additional advantage of a fixed coupon (2.5% per year) and government backing, and they remove jewellery-making costs, making them an efficient way to get gold exposure.
SIPs buy mutual fund units (equity, hybrid or debt). Liquidation of mutual fund units is straightforward via the platform or distributor. Equity-oriented funds that qualify as “specified securities” attract long-term capital gains tax if held beyond 12 months. Post the July 2024 tax changes, LTCG rules and thresholds were revised, which investors need to factor into net returns.
From a tax perspective, SGBs enjoy capital-gain benefits if redeemed at maturity. Physical gold and gold ETFs attract different capital-gains treatments. Meanwhile, equity mutual funds currently offer an exemption on LTCG up to the specified threshold, with gains above that taxed at the prescribed rate. This remains favourable when compared with inflation-adjusted returns on gold over long periods.
Behavioural and allocation considerations
Gold is a defensive allocation. It performs as a portfolio stabiliser, particularly when correlations across risk assets rise in crises. SIPs, by contrast, institutionalise saving discipline and harness the equity risk premium. They suit investors who can tolerate interim drawdowns and seek wealth creation.
The surge in SIP AUM and equity fund flows indicates a lasting behavioural shift among Indian retail investors. They are increasingly moving from holding physical assets to adopting financial instruments, supported by digital platforms, higher financial literacy and policy tailwinds.
Verdict: Who is winning?
If “winning” is defined as consistent capital accumulation and participation in India’s growth story, SIPs are in the lead. They have attracted record inflows, benefited from falling interest rates and historically delivered superior compounded returns for long-term investors. Gold, however, is not obsolete. It remains indispensable as a hedge, an inflation and crisis buffer, and for meeting cultural demand in India.
For most Indian savers, the pragmatic solution is balance. A core allocation to SIPs (equity via diversified or index funds) can support long-term growth, while a smaller gold allocation (SGBs or ETFs) adds stability and portfolio insurance. This mix, adjusted for one’s risk profile and time horizon, is an effective way to allow both instruments to play to their strengths.
