Gold or Real estate – which is the best option for you?
Real estate investing may be an unfamiliar investment vehicle, but that does not mean it should be ignored. A real estate investment can be a successful and trustworthy investment opportunity that generates considerable profits if approached appropriately. It can provide a steady stream of income while also adding value to your portfolio through tax advantages, diversification, and a lower-risk investment option.
On the other hand, there are a variety of reasons why people, particularly Indians, favor gold as a kind of investment. Many Indian families have treasured gold for generations, handing it down from generation to generation as a source of wealth. The greatest advantage of investing in gold is that it allows you to be highly versatile with your money. Depending on how much money you have to invest, you can buy 1 gram, 5 grams, 10 grams, or any other amount of gold. So, depending on your investing appetite, gold investments might range from a few thousand rupees to thousands and billions.
Is investing in real estate a wise choice?
Some of the top reasons why real estate is a wise investment option include:
- Low volatility: When compared to gold, real estate property is a more stable investment alternative. Additionally, owning a home ensures a stable future.
- The expenses add value: Repairs and renovations can raise the value of a home. Unlike gold, the property can be changed whenever you want.
- Income from renting it out: Even if you are living in the property, you may always rent it out to generate monthly money. Rental income is a wonderful way to generate positive cash flow. You can also use the property as collateral for a loan.
- The value of real estate will always appreciate with time: the longer you keep your property, the more it will appreciate.
- Portfolio Diversification: By investing in real estate crowdfunding options, you can diversify your portfolio as well. Since real estate investment options such as crowdfunding and fractional ownership require smaller capital investments, it becomes easier to diversify the portfolio. You will be able to invest in a stable and less volatile market in different cities using these options.
- Benefits of Inflation: Real estate sector also has a hedge against inflation as the price of the property also improves with the rising inflation rates. In case you have rented out your property, you may also be benefitted from the increase in inflation rates as the rental income increases.
- Other reasons: Tax deductions on mortgage interest, operational expenditures and legal charges, property taxes, and depreciation are just a few of the advantages of investing in real estate. If you use it as a rental property, real estate is not only a safe investment, but it may also yield higher returns over time while still providing a steady income. It’s a fantastic purchase. It’s an excellent investment option for a variety of reasons, including the fantastic tax benefits and the ability to leverage it to generate wealth.
Why is gold a good investment option?
There are several reasons why people prefer to invest in gold over other financial options. The following are some of the advantages of owning gold over other investment options.
- Keeping its worth: Unlike paper money, gold has held its value throughout history. Gold is seen as a way for people to carry on and maintain their wealth from generation to generation.
- Hedge against inflation: Gold has shown to be a great inflation hedge because the price of gold tends to rise in tandem with the rise in the cost of living.
- Portfolio diversification: Portfolio diversification refers to the process of selecting investments that are not closely tied to one another. Stocks and mutual funds have historically had a negative association with gold. As a result, it serves as a diversity tool in your portfolio.
- No counterparty risk: There is no counterparty risk with gold because it does not require any legal formalities or a written contract to be valid. The contractual duties can be fulfilled without the use of an intermediary.
- Liquidity and portability: Gold assets, particularly gold coins and gold bullions, are ideal for investors since they are very liquid and portable. You can take gold with you everywhere on the planet and sell it in seconds.
- Zero maintenance cost: Gold does not require maintenance and has no carrying expenses, unlike real estate. Simply lock it until you require it. Furthermore, gold has a high-value density. You don’t have to pay a carrying cost if you have lakhs of rupees worth of gold in your home.
The key difference between Real estate and Gold
Size of investment
In the case of real estate, the investment magnitude is enormous. Land, as a scarce resource, is in high demand, with prices rising at an exponential rate. To invest in real estate, you’ll need a large lump sum investment as a down payment, as well as debt financing.
The amount you invest is entirely determined by your investment appetite. You can start buying gold for as little as 1 gram. Because gold jewelry is susceptible to additional making charges, it is preferable to invest in gold coins or gold bullion.
Real estate is a fantastic long-term investment.
Gold can be held for both short and lengthy periods. Long-term gold investments, on the other hand, can yield a higher rate of return.
Real estate is one of the best methods to generate a steady stream of cash flow every month. A rental property can charge a monthly fee, with a portion of the money going toward the mortgage.
The returns are subject to market fluctuations. When the price of gold falls, so does the value of the investment.
When compared to gold, real estate has less liquidity. It could take a few days or even months to sell your property. When selling a home, there is a lot of paperwork and stamp duty to deal with, making the process lengthy and complicated. However, if you invest in crowdfunding opportunities provided by platforms like Assetmonk, you can improve the liquidity rate.
Purchasing and selling gold is a straightforward procedure. Gold is a highly liquid asset that may be cashed at any moment with minimal paperwork.
When compared to gold and other investment possibilities, real estate has a low level of volatility.
Real estate is less volatile than gold. The price of gold fluctuates daily.
Real estate has several tax advantages. When calculating the tax, depreciation, mortgage tax deduction, cost of repairs and maintenance, and cost of legal services are all taken into account.
Gold is subject to capital gains taxes. Furthermore, any profit made on gold deposit certificates is completely tax-free.
Transparency in prices
Real estate prices aren’t always as transparent as gold values. Furthermore, when dealing with real estate, historical data may not be readily available.
The gold market is very active. The value of gold coins and bullions is well-known.
Real estate vs Gold –the ideal option for earning better returns
Real estate has historically yielded an average of 8% returns and has the potential to yield 15% or more. Despite the increase in rental demand, India’s rental yield is roughly 7% to 9%, which is lower than other investment possibilities. When you consider the flip side of the coin, real estate can provide consistent monthly income that a gold investment cannot.
Real estate can be a good long-term investment because the value of the property rises over time. Real estate has a higher return than gold and is less volatile. Furthermore, when the economy improves, so does the value of your home. It’s a good idea to include real estate in your overall wealth-building strategy.
Gold is an excellent investment since it outperforms inflation. The returns on a gold investment are about in line with the rate of inflation over time. The downside is that when gold appreciates, it is due to a devaluation of paper currency. As a result, profits on gold investments are negligible.
For a secure future, selecting the appropriate investment plans is critical. When you choose the appropriate investment option, you can only anticipate the best results. Investing in gold or real estate should be based on your personal and professional qualifications. While gold is more flexible, the property has the potential to give long-term and consistent income. Diversified investments should be thoroughly examined in light of your objectives.
Assetmonk is a real estate investment platform offering properties in major Indian like Bangalore, Chennai, and Hyderabad. We offer properties with an IRR of 14-21% and our products are categorized into Growth, Growth Plus, and Yield models. Visit our website to know more.
Gold or Real estate – which is the best option for you? FAQ's:
Real estate is an excellent long-term investment option. Gold can be held for both short and lengthy periods. Long-term gold investments, on the other hand, can yield a higher rate of return. Real estate is one of the best methods to generate a steady stream of cash flow every month.
Long-term, an equity mutual fund outperforms gold. The ideal alternative is to invest in mutual funds through a systematic investment plan (SIP), as mutual funds offer higher returns than gold. A real estate is also a good option as it offers stability and low volatility. Thus it is a much safer option for the investors.
Because gold’s price rises in response to circumstances that cause the value of paper investments, such as stocks and bonds, to fall, it’s a good way to diversify your investment portfolio. Although gold’s price changes in the near term, it has always kept its value over time.