If you’re considering long-term investment options, then note that both real estate and gold can be good avenues for wealth creation. Both have their shares of pros and cons. When it comes to real estate, it acts as a safety net and can help you earn profits if you plan to rent out your property. Gold, on the other hand, only yields profit when you sell it. However, it can be easier to invest in gold than property, which is often rather expensive.
So, which of the two options is a better one for you: Real Estate or Gold? Let’s find out!
A. Key Differences Between Gold and Real Estate
| Factors to Consider | Real Estate | Gold |
|---|---|---|
| Earning Potential | The earning potential is higher with real estate as you can always rent out the property and enjoy profits. | The price of gold depends on the market, which means that your ROI depends entirely on when you sell the asset. |
| Investment Size | Real estate investments can be quite pricey, with property costs often starting at lakhs. However, you can indirectly invest in real estate through REITs or mutual funds. This can make the investment more affordable. | You can invest in 1 gram, 5 grams, or 10 grams of gold based on your preferred investment amount. |
| Tenure | Real estate should be considered a long-term investment, which means that the minimum investment period should be 10 years. | Gold is ideal for both short-term and long-term investments. You should ideally sell the gold when the market prices are high. |
| Volatility | Real estate investments tend to hold their value, and are considered to be less volatile than gold. | The price of gold changes on a daily basis and this commodity is considered more volatile than real estate. |
| Transparency in Prices | Finding data related to land prices can be challenging, particularly in newly-developed areas. | As gold is actively traded in the market, you can expect greater transparency in prices. |
| Tax Benefits | You can expect structured tax benefits when you invest in real estate. Typically, factors like maintenance cost, depreciation, cost of repairs, and mortgage tax deduction can help determine your tax benefits. | Gold is subject to capital gains tax. However, if you earn any profits on gold deposit certificates, they will be exempt from taxes. |
| Liquidity | Selling property can take a long time, which makes this less favourable for those who want to sell the asset for funds quickly. | Gold offers high liquidity as it can be sold quite easily. |
B. What Returns can You Expect from Real Estate and Gold?
Based on past performances, we have created a table that should let you know about the returns you can expect in the case of real estate and gold.
| Type of Investment | Returns on Real estate | Returns on Gold |
|---|---|---|
| 8-15% (depending on the location) | Depends on the market performance and when you sell the gold. In general, gold offers returns between 5-12%. |
C. Benefits of Investing in Real Estate!
Investing in real estate offers a range of advantages such as:
- Tax Benefits: You can enjoy tax deductions on mortgage interests, legal costs, depreciation, property taxes, and operating expenses.
- Low Volatility: Real estate is generally less volatile when compared to other investment instruments, making this a good option for those with a low-risk appetite.
- Regular Earnings: By renting or leasing out your property, you can supplement your monthly income and enjoy investing the funds in other avenues.
- Increase in Value with Time: A real estate is a good option for those who want long-term wealth creation options as the value of property tends to increase with time.
- Control Overvalue: By adding amenities to your property, you can add to its value and thereby earn more.
D. Benefits of Investing in Gold!
Investing in gold offers many different advantages such as:
- Hedge against Inflation: During inflation, the price of gold rises, which is why it’s such a popular investment avenue.
- No Hidden Costs: Unless you are investing in gold mutual funds, you do not have to worry about management and operational costs adding to the cost of your investment.
- Easy Diversification: A diverse portfolio refers to one that has investments in industries that are not related to each other. Investing in gold, thus, helps you diversify your portfolio easily.
- Consistent Value: Gold tends to hold its value over time, which is what makes it a good idea for people with a low-risk appetite.
- High Liquidity: It is very easy to sell gold, making it an asset that can be liquidated as and when you need it done.
- No Counterparty Risks: There are no legal obligations typically associated with investing in gold.
As you can see, both real estate and gold have their merits and can work well as long-term investment options. Ultimately, the investment amount plays a huge role in determining your ROI, so you should keep the same in mind while investing in either of the two.