For a new investor, the ambiguity that lies within today’s investment models can translate to a metaphorical migraine. Simply logging onto an investment portfolio website can present numerous investment options, some of which most aren’t even completely aware of. In this case, we must first bifurcate and simplify our investment ideas; remove any complicated options such as derivatives and fixed deposits (if an investor is only interested in banking returns of 6-7 per cent , this article was never meant for them).

The obvious thing is to fall upon tangible investments, primarily commodities. Where silver is trading in its own unique way, gold and real estate have universally been more exciting options for investors. Now to begin the trade-off between these two titans, we need to focus on our local markets.

Gold has a certain ‘vintage’ quality, that feeling of innately trusting it as a form of investment. And why not? It is a tangible asset an investor can physically see, touch and feel. It has enjoyed an arduously built reputation over the years, even decades for that matter, as the ‘safest’ investment out there. Now you mind that in business school one of the first thing we learnt was the Risk vs Returns model: the more you risk, the higher your expected returns shall be.

Safe investor

So you’re a safe investor now. What happens when this always appreciating investment goes for a bit of a rollercoaster ride worldwide, and people begin to lose their long-held faith in it? Time to get a bit more adventurous?

Being a Mumbaikar, my assumptions are based on the unique market of Mumbai. Yet many principles hold true for the investor looking pan-India. We are a seriously overpopulated country, with an enormous internal appetite for commodities. Industry stalwarts can boast that in this country, real estate can match up to any investment. As an investor though, you’d require a little more convincing.

The story continues

So what should you look at? The answer stems froma more personal equation between liquidity, appreciation, other income and probable growth.

Firstly, India’s growth story is far from over. At least, not for the next decade. The reason is simple: We are a developing nation with an abundance of cheap resources that are waiting to be utilised in the globalisation format. So GDP is not an issue here, not in the long term.

If, as an investor, your perception of making a good return is a quick buck, by all means look at other commodities besides real estate. For this option to be really fruitful, you must look at a long-term holding capacity. That being said, in this highly competitive market, financial institutions have come up with some fascinating innovations for investments, such as the 20:80 scheme, where investors may lock in an investment by paying only 20 per cent, and pay the rest on possession, without having to pay the interest and still enjoy the complete appreciation in property value.

Real estate, unlike gold and other commodities, can also provide alternative revenue streams; you can lease out your property and benefit from rental incomes. Metal commodities do give you an option to leverage against them at a lower collateral rate than real estate, although gold is seldom pledged for the long run.

What’s the answer?

So what’s to be made of this? The answer, like most things in life, lies in balance. Maintaining a realistic portfolio of investments, with a mix of more aggressive real estate options and safer commodity investments will see you smiling all the way to the bank.

A word of advice in this immediate context: the dollar’s incredible appreciation against the weakening rupee makes bullion trade a lot riskier than earlier. So for the time being, be a bit more adventurous and invest in real estate. You’ll find it’s a safer investment than many other volatile options today.

Related Topics
comment COMMENT NOW