Which is the best investment option - Stock Markets, Real Estate or Fixed Deposits?

Nutan Gupta

05 Jun 2017

New Page 1

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
Volatility Low Low Very High
Liquidity Moderate Low 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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mutual-fund

Why to Choose Mutual Funds Instead of Directly Investing Into Equities?

Whether to invest in equities or mutual funds is a question that has plagued every investor. As someone who needs the best value for his/her investment should you invest in equity directly or via mutual funds?

Let’s start by first understanding what these two terms ‘equities’ and ‘mutual funds’ stand for-

Equities- Equities generally represent ownership of a company. If you own any equity in a company, you are a part owner of the said company (depending on how much equity you own).

Mutual Funds – It is an investment scheme which is professionally managed by an asset management company. It pools together the resources of a group of people and invests their money in equities, debentures, bonds and other securities.

Why choose mutual funds over equities?

For people who’ve never invested in either stocks or mutual funds, it is hard to know which is better and where to start. Broadly speaking, if you are a novice investor, mutual funds are not only less risky but also way easier to manage. Here are some ways in which investing in mutual funds is beneficial as opposed to investing in equities -

Diversification

Mutual funds provide more diversification as compared to an individual equity stock. When you invest in equity, you are investing in a single company which has its inherent risk. For example, if you invest Rs.20,000 in buying equities of one company, you could face a total loss if that particular company performs poorly in the market.  

If you invest the same amount in mutual funds, it will be invested in different kinds of stocks and financial instruments, high-risk and low-risk both, so you might not face total loss even if one company does poorly.

Scale of Investment and Lower Costs

For an individual investor buying and selling stocks is a difficult task due to its high price. Thus, any gains made from stock appreciation are nullified if the overall trading costs are considered. Comparatively with mutual funds, as the money is pooled from a large number of investors, the cost per individual is lowered.  

Another advantage of mutual funds is that you don’t need to invest large sums of money. Buying equities for a profitable venture needs huge amounts of money, a minimum of few lakhs. With mutual funds, you can start with Rs.1000 and earn profits on that as well.

Convenience

Keeping an eye on the markets everyday is a time-consuming business, especially if you are investing as a side gig. There are people who spend their lives studying the market and still end up sustaining heavy losses. Though investing in mutual funds does not guarantee high returns, it is stress-free and needs less work as compared to investing in equities.

To sum it up

It is important to remember that mutual funds have their own disadvantages as well. Thus, as with any financial decision, educating yourself and understanding the suitability of all the available options is the ideal way to invest. 


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Which is the best investment option - Stock Markets, Real Estate or Fixed Deposits?

Nutan Gupta

05 Jun 2017

New Page 1

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
Volatility Low Low Very High
Liquidity Moderate Low 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.


Have Referral Code?