Gold and real estate are the two most common forms of long-term investment. When you compare them, there are some similarities. The main similarity is that both can be bought in small quantities or large quantities, and both can be used as collateral for loans. But there are several important differences as well. Here we compare these two major forms of investments to help you decide which one works better for you:
- Liquidity
Gold is very easy to sell and since it is a commodity there are no contracts or repairs needed. There are many investors so you can always find someone to buy your gold. You can sell gold as soon as you want, without having to wait for the buyer or to pay any fees. When you want to sell your gold, you can do it easily by going to a nearby jewellery shop or pawn shop and exchanging it for money at the current rate. You don’t have to worry about proper documentation or finding a buyer through an agent. All you need to do is be aware of gold price today Bokaro or wherever you live to know when is the right time for you to sell the gold.
Real estate is also great but doesn’t have the liquidity of gold. With real estate, selling takes time. You will have to find a buyer willing to cover the price that you ask for your house, and this might take months or even years. Also, you need to buy a house in cash or take out a loan which may take time to get approved if you are not wealthy. The liquidity of these two assets differ for several reason
- You can also easily sell gold in small amounts, in contrast to real estate. For example, if you need to sell only a part of your gold (e.g., 10 out of 100 grams) – it would be easy and fast to do so. On the other hand, with real estate, it’s hard to sell only part of a house, especially when it’s small.
- Gold is not subject to performance risk. In contrast to real estate, where the value of an asset may change due to its location or condition, the price of gold is determined by supply and demand factors that are not dependent on those issues.
Inflation
Historical data shows that gold has consistently beaten inflation.
After World War II, for example, inflation was at 14 per cent and the U.S. dollar had lost more than half its value. Gold, on the other hand, had gained 267 per cent in value.
But real estate is a trickier proposition. It is often said that ‘real estate never goes down in value.’ This may or may not be true, depending on location and economic conditions, but even if it is true, real estate doesn’t necessarily go up in value either. Even if you don’t have to worry about a real estate crash like the one we just went through between 2006 and 2009, real estate can stagnate for years at a time.
So when it comes to beating inflation, gold wins again.
- Increase in value
Another difference between gold and real estate is that while the supply of gold is fixed, the supply of real estate can be increased by building more houses or apartments. This means that there are things you can do to increase the value of real estate: renovate an old building to make it nicer; split one house into two apartments; build another floor on top of an existing apartment building; etc. There are a few ways you can increase the value of gold, apart from adding workmanship to create jewellery out of raw gold bars or bullion coins. So with gold you are essentially stuck tracking today gold rate in Srikakulam or Kerala with fingers crossed hoping for the price to be favourable for your investment. Check out this page for more info.
