Indians love and have always been drawn to the gleam of gold. Historically, we have been inclined to acquire gold jewelry in the belief that it represents high economic status. Investing in gold was also thought to be prudent at one time. However, with recent price fluctuations in gold, it is natural to wonder if the venerable yellow metal is still a good investment option.
Investment is crucial for survival in today’s time when the economy is quite volatile. Debatably, the two best ways to do this are by investing in real estate and gold. Real estate involves the purchase, ownership, and management of a property until it is sold for monetary liquidity.
Similarly, gold can be bought in the form of coins, biscuits, or even jewelry that can be saved up till the time when it needs to be liquified. The information below will give you a brief analysis of which asset is more favorable for you to invest in and why so that whenever you invest, you know thoroughly what you are doing and what will be your best choice.
If you had held 500 grams of gold in 1997, when the price was Rs 472.25 per gram, you would have been safe with about Rs 2.36 lakh at the time. Gold was worth Rs 3,520 per gram in 2019. This means that if you have 500 grams of gold today, it is worth Rs 17.60 lakh. However, given the fluctuation in its value, most gold holders are aware that the net change in value over the last six months has been minimal. When compared to the cost of land, this is a bargain. If you had purchased land in 1997 and built on it, you would have invested in the future of two of your children.
Real Estate Vs Gold: Value And Performance
In terms of the value of the investment, there needs to be an assessment of both short and long-term aspects because they both subsequently affect each other. In the case of gold, it is a good short-time venture to indulge in since there can be legal speculation and estimation of gold prices. Besides, it can be used at face value if it is in the form of jewelry and then can be liquidated very easily. In the long term though, it might not hold much value considering the natural layers over the real gold and fluctuations in prices as well as demand.
Real estate, contrastingly, is great for long-term investment since it does not need maintenance and the liquidity is also good apart from the fact that it saves taxes as in a lot of cases. The real estate market always has buyers and a good real investment will stand through. A short term investment will also hold up in the real estate market and this is proven because there are so many people who keep buying and selling different places on a daily basis.
Risks involved are important since they hold reason as to why the performance of these assets rises or falls. Both the assets have risks involved in terms of natural damage- real estate by natural calamities and gold by air and moisture exposure and time as well. The risk involved in gold might even lead to a loss because it is a volatile area of investment with imbalanced fluctuations taking place. With time, it may corrode or form an oxidized layer which further increases the risk of getting a fair value. Property prices on the other hand rise more often than fall. You are more likely to get a fair price for real estate than for gold.
Real Estate Vs Gold: Exit options
When you think it is time to utilize the investment for its monetary value, you can exit out of the investment and redeem it for its value. Considering the size of the investment, we can easily make out exit options which are much easier in terms of gold but are they always worth it? No.
Though real estate might need some time to get potential buyers for the worth of your property, gold works with fixed rates which might not reap what you have and would deteriorate with passing time. Thus, exit options are better in real estate even though the ease of exit might not always be available. In the case of gold, the ease of exit is always there but the options are negligible to none considering the rigidity in rate and value.
Real Estate Vs Gold: Resale Options
When we talk about liquidity, what we really mean is the re-sale of these assets in the market so as to monetize it. We can put these as a mortgage, in case we need the money and do not want to sell the asset yet. This would involve returning the money which not a lot of us can afford, not to mention the high rates of interest. Thus, resale as an option seems lucrative when in need of a heavy amount.
It is when we talk about re-sale that we realize the monetization value of your asset. Gold has a volatile structure as we know and is more often than not sold for much cheaper than what it was bought for. Real estate, on the other hand, gives soaring values when an investment is made at the right time and the right factors are kept in mind. With more scope of re-sale, real estate is a much more flexible option for long-term investment.
Real Estate Vs Gold: Physical Asset and Return
Both real estate and gold investments are physical assets and return higher values. Although gold is great at face value, it does not hold strong as an attraction especially during times of recession. A physical asset may or may not have a face value. If the property is well-built and livable, it can be a regular income by charging for it. Gold cannot be rented through, so it is only to be either kept in a locker or be used for its shining outlook.
Real estate is also much stronger in outlook and cannot be ignored to set a social standing among people since it can be shown as a representation of economic stability and standing of the individual and family. That physical asset stays strong and is not susceptible to being stolen or lost like small pieces of gold.
All in all, we need to remember that the economy is not too stable right now and it is expected to fall even further thereby establishing the fact that we need to make investments. Savings help us in times of need and act as a trampoline to cover for us. It is important to incline towards real estate since that way, we are surer of what is hitting us.
During a recession, prices tend to increase due to inflation, and income decreases. So, to overcome the gap, we need money to be circulated in the economy for the restoration of normalcy. When an asset like real estate is dissolved to fulfill monetary needs, the process of restoration begins, bit by bit. Thus, it is a great option to invest in real estate through a trusted company like Assetmonk, considering all the above factors and thus, including benefits.
Real Estate Vs Gold FAQs:
Debatably, there are 2 best investment options in India. They are:
2. Real estate
Considering the long term benefits, resale value, liquidity, and risk factors posing for both, real estate is a better option. But, if you are looking for a short term investment and easily disposable option, gold can be considered as a good option.
Both the assets have risks of damage by factors natural in origin as follows.
1. Real estate by natural calamities like tsunami, floods, etc.
2. Gold by air, moisture exposure, and time
Though real estate might need some time to get potential buyers for the worth of your property, gold works with fixed rates which may not yield what you have and would deteriorate with the time that passes by. Thus, exit options are better in real estate even though it is not easily disposable and exit options are not always available. But in the case of gold, it’s the reverse. The ease of exit is always available but the disposable/exit options are negligible considering the rigidity in rate and value.
During a recession, prices tend to rise due to inflation and the income tends to fall. So, to overcome this gap, we need money to be circulated in our economy for the restoration of normalcy. When an asset like real estate is sold or just dissolved to fulfill monetary needs, the process of restoration begins, bit by bit. Thus, it is a great option to get going with investing in real estate.