Which is the best investment option - Stock Markets, Real Estate or Fixed Deposits?
Investment is viewed as the backbone for one's stability and development. The simple idea behind investing money is the expectation of higher returns, with minimal risk faced. But an investment plan in this diverse market comes in different forms. The three common kinds of investment options; Stock Markets, Real Estate, and Fixed Deposits have their own merits and demerits.
Stocks Markets vs Real Estate
The stock market is an intersection where buyers and sellers of stocks belonging to various companies meet. Despite the more dynamic nature of stocks, real estate provides more control over monetary activities. An individual with stocks is a mere spectator, swaying along the direction in which the company's stocks are moving. Unlike the above, you are in direct control of your assets. Also, unlike the risks under stocks, a real estate asset is a much safer investment, where the asset value isn't subjected to drastic fluctuation.
But when one talks about stock markets, the higher rate of return should never be undermined. Stocks can be disposed off too easily, unlike real estate assets. Stocks enable you to invest in various sectors and themes, while real estate is restricted to one's financial capability.
Real Estate vs Fixed Deposits
Real estates and Fixed Deposits, both provide the financial security that an investor is looking for. Under fixed deposits, an investor is assured of their returns. Liquidity in fixed deposits is very high. One can break the FD anytime he/she wants. The same scenario, during urgency, cannot be repeated in real estate for one might have to dispose of the asset in value much cheaper than the true market value. Also, fixed deposits are flexible to invest in, with an option to invest any amount for a time duration ranging from a month to a decade.
Alongside, one disadvantage of fixed deposits is their low returns, which barely competes with the nation's inflation rate. Properties bought in real estate puts one in direct control of his/her investment. Where fixed deposits are stagnant to an extent, real estate values doesn't follow the same capping as does the former.
Fixed Deposits vs Stock Markets
As discussed, under fixed deposit an investment is more secure as compared to stocks. But this security comes at a cost of low returns. Investment in the stock market would yield a higher dividend. Another aspect diving these two would be liquidity. Stocks can be sold or bought at an easier rate. Whereas, fixed deposits come with a stipulated lock-in period. If one wishes to withdraw their FDs within this time period, they will attract a pre-closure charging fee and receive the amount at a lower rate of interest.
Summing it up
|Fixed Deposit||Real Estate||Stock Market|
|Rate of Interest||Moderate||Moderate||Very High|
|Taxation||Interest income is fully taxable||Transaction is governed by several taxes||Short-term dividends are taxed. Long-term dividends are tax-free|
The table above aptly sums up various points surrounding stock markets, fixed deposits, and real estate. Every investment policy is unique. The three compared above; each has pros that are highly lucrative for an investor. It hence falls upon the investor to make the right investment depending upon his/her capability.
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