Tue Jan 28, 2014, 1:00 pm | 1 Comment
This dilemma is one of the latest ones to hit the financial market? A lot of investors are now questioning the stability of gold vis a vis that of property. The point that cannot be ignored is the fact that both are intrinsically connected.
At the furious rate at which the government is printing money, inflation is bound to happen in the near future.
The inflation will obviously lead to a hike in the price of gold. Since gold s forever in fashion, it is always considered to be a safe haven for investors.
However, before deciding on either gold or properties in Mumbai, here are factors that you should consider.
Gold has many uses in the financial system of exchange. It can be used as currency, for the purposes of investing and many other things as well. Even in the future, it seems to hold the promise of being used as a token of payment.
Thus, with the falling dollar, the gold value will increase exponentially over the next few years. The best way to make money off gold is through buying it at a low price and selling it when there’s a huge jump.
Gold is a dead weight investment
However, gold investment is also considered a financial dead weight. This means that it doesn’t yield a steady cash flow like real estate does. You can invest in real estate through lease options where you don’t have to put any money down. Investment in rental properties in Mumbai will yield a steady income, as opposed to gold.
At the beginning, your income might be just a few hundred dollars every month. But it slowly adds up over time. If you are into wholesale, then all you need to put down is ten dollars. Then you can give the contract to someone and earn up to ten thousand bucks. With leases, you don’t even need to put in any money.
However, when inflation comes knocking, the price of real estate will rise along with the price of gold. This is because both are considered to be physical assets.
Thus, if you want a steady flow of income then put your money in rental properties and so on. If you just want a big payout at the end of the day, then gold is the way to go.
Real estate is subject to market risks
However, the steady income that real estate yields also comes at a cost. It is always subject to market conditions and crises. Unlike gold, which never depreciates in value and is a safe form of long term investment, real estate values will fluctuate.
Gold Liquidity is a misconception
There are many misconceptions when it comes to buying and selling gold. It is believed that gold is easy to both buy and sell.
However, they fail to mention the many hidden clauses and costs when it comes these buy-back gold transactions. When you decide to liquidate your gold investment, you will have to pay a fine along with insurance and handling costs too. Because real estate is less liquid, it is also less volatile.
Remember that when the value of gold does go up, you don’t really gain that much as opposed to an increase in buying power. Because when gold values rise, it comes hand in hand with a devaluation in paper currency.
Also, in terms of tax, real estate is much more tax favoured as an investment option compared to gold. In today’s market, you’d probably be safer with money in houses than gold.
About the author
Sarah Marshall is a financial consultant working for an investment bank for the past decade. She specialises in real estate investments, especially properties in Mumbai. Sarah loves to watch comedy films to unwind in her spare time.