Gold vs Real Estate vs Equity

Gold vs Real Estate vs Equity

Comparison Between Gold vs Real Estate vs Equity

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India is one of the countries where people tend to save money in bank accounts rather than investing them in a return generating field. Financial knowledge on ‘where to invest’ would be beneficial if we plan to invest our money somewhere. Gold v/s real estate is a common confusion among the people who think of investing.

Investment is not a risk-free process, and hence, it is better to have a good understanding about risks and asset classes. Every investor should choose the right asset class to invest depending on their own appetite for risk. Asset classes can be broadly classified into three; real estate, gold and equities. Equity can be stocks and mutual funds; gold can be physical or jewellery, and real estate can be equated as property.

Each of them has varying degrees of volatility and risk-return potential. Hence, before zeroing in on an asset class to invest in, it is vital to understand the pros and cons of equity v/s gold v/s real estate.

Comparison of the Three Main Asset Classes

Parameter

Asset Classes

Equity

Gold

Real Estate

Entry Barriers

Only a small amount is required to start

An appreciable amount is required

Requires a high amount to start

Regular Savings

Yes

No

No

Risk

High

Medium

Medium

Returns

Potential high

Medium to high

Medium to high

Inflation Protection

High

Medium to low

High

Liquidity

High

Medium to low

Low

Regular Income

Yes (if the stocks and funds are dividend paying)

No

Yes (if you rent out your property or land)

Long Term Capital Appreciation

Yes

Yes

Yes

Transparency

High

Low

Medium

Tax Advantages

No tax on long term capital gains

No

Few

Cost of Maintenance

Negligible

High

High

Professional Management

Yes

No

No

Transaction Cost

Low

Low

High

Ease of Selling

Yes

No

No

Part Selling

Yes

Yes

Difficult

Diversification

Yes, through diversified mutual fund schemes

No

No

Asset Classes Details: Equities, Gold and Real Estate

Let us take a closer look at these assets which constitute the conventional investment portfolio of an Indian investor. So, here are the benefits and drawbacks of each asset for an easy comparison of gold v/s real estate v/s stocks in India.

1. Equity

Key Benefits

  • Diversifies the investment portfolio and reduces the risk associated with parking all funds at a place.

  • It is relatively easy to liquidate the stocks and funds.

  • You will have the potential to earn high returns.

  • In case of mutual funds, you can start with a minimum amount of Rs. 1,000.

  • Money is handled by professional fund managers.

  • Post-tax returns are efficient.

Drawbacks

  • High risk associated with the short term investments.

  • High volatility in the short term investments.

  • Difficult to choose stocks.

2. Gold

Key Benefits

  • It is easy to invest in physical gold.

  • Gold investments will give high dividends over the long-term.

  • You can convert gold into jewellery and ornaments for personal use.

  • You can avail of loans easily by mortgaging the gold.

Drawbacks

  • Price of gold is associated with several macro-economic factors.

  • There are no tax advantages for gold investments.

  • Storing gold possesses high security risks.

  • Cost of storing and maintaining gold is high.

  • No regular income in the form of dividends or rent.

  • Transparency in case of buying and selling gold is low.

3. Real Estate

Key Benefits

  • Comparatively low volatility.

  • A gradual increase in market prices will lend stability to your investment.

  • You can avail of house loans easily by mortgaging the property.

  • If the property is rented out, you can earn regular income.

Drawbacks

  • Requires a large capital to invest in property.

  • High transaction costs due to stamp duty and registration.

  • Cost of maintaining the property is high.

  • Liquidity is low, since properties are difficult to sell immediately. So, it is not easy to use this investment during emergencies.

Equity vs Gold vs Real Estate FAQs

  • ✔️Which is better, equity or real estate?

    The returns generated by investing in equity stocks and funds are comparatively higher than that of real estate investments. However, risk associated with equity is comparatively higher than a real estate investment.

  • ✔️Is gold a better investment than property?

    Real estate is a highly stable investment option, which provides better returns than gold without much volatility. More than that, real estate investments come with low risk. When the market improves, the value of your property too increases. Gold is a commodity, which comes with higher volatility and risks of being stolen.  

  • ✔️Is it good to invest in gold and equity?

    Investing in equities will get you higher returns as opposed to investments in gold. Long-term returns from equities can range between 14 to 16%. Profit from the equity investments comes in the form of capital gains and dividends.  

     Gold is considered as one of the safest investments and its long-term value indicates its consistency and appeal across time. Gold quickly recovers its value during economic downturns. So, it is good to invest in both gold and equity.