‘Do I invest in Gold or real estate?’ This is a question that usually pops up in almost every investor’s mind specifically because there has been a lack of confidence in traditional investments such as bonds, stocks and mutual funds. Well, both gold and real estate investments are considered to be a good hedge against inflation and fluctuations, both have intrinsic value, which typically means that their price never goes to zero, and both are considered as long term investments.
Comparison between Gold and real estate
So where comparing them, it’s like comparing oranges and apples; there are both fruits but with different benefits to our body which makes it very hard to decide a better option between the two. Most people who have been in real estate will tell you that it does very well, but different statistics in many parts of the world have shown that in the last 40 years, real estate has been experiencing the worst performance. Admittedly, Gold has performed extremely well and has actually increased in value with an annual increase of around 5 percent for the same period. So, from an appreciation perspective, real estate has held its part with an average annual rate of more than 5 percent even during recession years but not as much as gold has which means gold is a safer investment in the sense that it never depreciate.
Difference in cash flow and stability
Real estate outperforms gold in many ways, from cash flow, leverage, tax benefit, equity and somehow control, but unlike gold, it requires intensive management. If the managements not okay, gold investments would be far much ahead. Investing in real estate guarantees a steady cash flow while gold investment is considered as a dead weight. This does not mean gold yield no profit, sometimes people who invest in gold admit that it is the better investment in terms of profit in the short term, not much risk associated. Although gold is considered to be more stable than other investment such as stocks, it is still a little more volatile than real estate. There are usually hidden costs in offers of buy-back of gold purchases. If you want to liquidate gold, you will be penalized for meltdown value, leave alone incurring shipping costs if any, handling and insurance expenses. Real estate, on the other hand, has a lot of benefits from its lack of liquidity which equates to lower volatility.
Which is better gold or real estate investment?
The best approach to developing a sound investment portfolio is to have a diversified approach. You buy gold, and compliment it with other investments. You can then top up real estate investment to enable you to get some steady cash flow or some extra income especially when real estate market is strong. Both real estate investment and gold investment has their pros and cons, so deciding which one to invest on may be based on personal preferences and of course, the purpose of investment, for instance, do you need a quick return? The best approach to determining the best investment is having a good broker or investment manager with you, ensuring you maximize your return on the investment you decide to use.