Do you have a fund corpus and are unsure where to invest it to gain healthy returns?
In India, people primarily use following four markets for investment:
- Buying real estate property
- Investing in the stock market and mutual funds
- Buying gold
- Keeping it in saving account or Fixed Deposits
Keeping money in saving account is a good option, but the limit should be just to meet some unexpected expenses. It is impossible to make money work for you by keeping it in saving account where the interest rate is merely 3%. To ensure that your money compounds and grows well, you need to invest it wisely.
When it comes to investment, instead of making a mixed portfolio with all the options, people in India usually look for the best choice. They look for an investment option that safeguards their hard earned money against risks. With real estate requiring large funds, they end up investing maximum part of savings in either fixed deposits (FD) or gold. But with increased awareness about other investment options like stocks, mutual funds and real estate, people now consider these as well.
If given a choice of real estate or stocks, they still get confused. For those, who find it hard to pick the best investment choice, here is a clear picture of the equity market and real estate in India.
Real Estate in India
In India, we grew up listening to the stories of properties which our ancestors bought at dirt cheap prices and later sold it at huge profits. You must have also heard your parents talking about the importance of owning a second home as an investment. In some communities in India, when parents look for a right match for their girl, they give a lot of preference to the property including land and residential buildings owned by the boy’s family. These are some of the things that keep the legend of real estate investment alive in Indian investment sector.
But you cannot make your money work for you with this conservative frame of mind. To ensure that your money has been invested well, you need to look at every aspect of both the options.
Comparison: Real Estate vs. Stock Market
In real estate, you get complete control over your investment. You can make any decision to optimize your wealth like repairs, improvements, rent and painting. while in case of stocks, someone else has the control. You are completely at the mercy of the board of directors and the decisions made by the board. At times, stock investors have to suffer due to the embezzlement done by higher level management.
If you have taken a home loan and have made down payment of 20%, your ownership in the property is up to this limit only. Now if the property value rises by 5%, your gain will be 25%. However, the bank owns 80% property any gain on the property will be yours. So even 5% rise in the property’s value gives you 25% profit on your 20% down payment. However, there is no option of compound growth in the stock market.