Investing in Real Estate, Gold and Equities - A brief comparison

Real Estate Vs Gold Vs Equities

Investments help us to grow our money. But a wrong choice will end up harmful and expensive.Therefore it is important to weigh the pros and cons of various schemes before investing in them.Let's break down three of the popular investment and compare them – Equity, gold and real estate.

Equities:
The best advantage of investing in equities is that the capital can be as less as ₹500 in schemes like mutual funds. In spite of low capital, equities have the potential to earn relatively high returns. Although equity market has many risks, they can be reduced by diversifying the investments across many schemes – there is no necessity to stay invested in just one scheme. Also, the money is managed by professional fund managers in case of . Capital gains for investments held over one year are completely tax free. Equities have high liquidity.

Disadvantages:
It is difficult to pick stocks due to the unpredictability of the stock market. We can't get loan on equity investments.


Gold:
Gold is one of the most favourite investments of Indians. The process of investing in physical gold is quite easy. Over long term, gold investments have yielded high dividends. Besides, gold can be mortgaged for availing loans and can also be converted into ornaments for personal use.

Disadvantages:
The price of gold is coupled with several macro-economic factors. So they are liable to change very often. If it is physical gold, it pose security risks in maintaining and storing them. Gold offers no tax advantage or regular income for its buyers.

Real estate:

As compared to gold and equity market, real estate offers stability to the investment due to low volatility and gradual increase in market prices. Renovation and repairs of the purchased property can increase the performance of the investment. If the property is rented, it can provide a regular income to the investor. Real estate properties are easy to mortgage in case of emergencies.

Disadvantages:
  • Capital: The capital required to invest in real estate, transaction costs like registration and stamp duty and the maintenance costs are very high as compared to gold and equity.
  • Liquidity: It is difficult to liquefy the investment in short notice as properties are challenging to sell on short notice.
  • Recovery time: Analyzing historical data, equity markets took less time for correction compared to real estate market in Indian tier I cities. It took lot of years for real estate market to correct and get back on track after hitting the peak between 1988-1994. Stock market recovers quickly when compared to real estate. Timing the market is the major factor in decision making. Lots of research is required in choosing the asset class.
  • Regulatory Structure: Real Estate is not an organised sector and doesn't have a stringent regulatory body like SEBI. With advent of RERA act, the regulations have tightened and industry participants are becoming disciplined. Because of low awareness among investor, regulations could reach full potential. It is a safe asset to invest for black money hoarders.


Let us just summarise few important points for a quick glance through the below table. 


​Equity Gold ​Real Estate
Min Capital Very Low (Rs. 500) ​Low ​Very High
Risk​High​MediumMedium​
​Historical Returns​High​Medium to High
Medium to High​
​LiquidityHigh​High​Low
Regular Income​Yes. If dividend paying stocks & Funds​No​Yes. If property is rented.
Tax Advantages​Yes​No​No
​Maintenance Costs​No​Low​High
Transaction Costs​Low​Low​High
Partly selling​Yes​Yes​Difficult

No one asset outperforms others consistently over time. Investors have to consider risk & liquidity along with returns before taking a decision. 

 

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Mutual fund investments are subject to market risks. Please read the scheme information and other related documents carefully before investing. Past performance is not indicative of future returns. Please consider your specific investment requirements before choosing a fund, or designing a portfolio that suits your needs.