Which is Worth Having – Land, Gold or a Fixed Deposit?

Last Updated : May 23, 2020, 11:19 a.m.

They say investments are not bought, they are always sold. And that holds true because investments are made with an eye on earning profits. There are numerous investments one look up to. But if we think from the perspective of a common man in India, it will predominantly be three – a land, gold and a fixed deposit. All three are different and comparing them won’t be fair. Plus, which is worth having from these would also depend on what the particular individual wants. The right approach would thus be to know about each of these three so that you can choose from them according to your want and comfort. So, without any further delay, let’s get straight to these investments.

Land – The Most Coveted Investment for Millennials

Gone are the days when land used to come cheap. Land prices have shot up significantly high in the 21st Century. Even as the real estate segment is going through a crisis of its own, land prices are way off from the reach of some working millennials. But home loans have made it easier to buy. Yes, there’s a plot loan, a part of a home loan, that lenders offer to individuals looking to purchase land and construct a home on the same. The loan, however, won’t finance the entire sum you need to buy land. You need to pay around 20%-25% of the land cost as well as the registration fee and stamp duty from your end.

Utilities of Land

• Land gives you the freedom to construct a home on the same the way you want, unlike homes sold by property developers who may not construct the unit to your likings
• Scope for higher profits as prices rise with time

Things to Keep in Mind While Buying Land

• You must buy land after checking properly the chain of owners in case you are buying a resale plot. Since some buy in cash, chances are that the seller won’t give a chain. In the absence of a chain, the scope for bogus land transactions remains higher.
• The land must have been approved for purchase by competent authorities

Gold – A Traditional Investment That Holds Relevance Even Now

Indians keep a close eye on the gold price that gets dictated by several domestic and international indicators. Besides for the purpose of investment, gold is also purchased for events like a marriage where the exchange of gold ornaments between two families is a ritual richly followed by the Indians. If we talk about the prospects of earnings on gold investments, let’s be told that the yellow metal has helped investors earn a return of 8%-9% over the last 10 years.

Utilities of Gold

• It can fetch you good returns over time. The sale value can be quite high if you hold on to your gold investments for long
• You can even get a loan against gold to meet any emergency needs. The loan can be granted to the tune of 70%-90% of the gold value

Things to Keep in Mind While Buying Gold

• Have a medium to long-term investment approach while buying gold
• You can look to stagger investments in gold too, particularly when the price is too high.

Fixed Deposits Favoured by Many Despite Lower Returns

Over the last couple of years, fixed deposits have become less attractive in terms of returns. The interest rates have come down to 4%-6% on average from 5%-7% a couple of years back. But it has not affected its adoption rate. If you consider the latest RBI report, deposits have grown by more than INR 2.8 lakh crore over 6 weeks of lockdown till May 8, 2020. From March 27 to May 8 this year, fixed deposits worth INR 4.4 lakh crore have been added to the banking system. As there’s not much hope for the uptick in demand soon due to the COVID-19 pandemic, chances of people investing in the high-return proposition of equities are not that high in the near future. They will most likely continue their investments in products like fixed deposits. Although fixed deposits are not impressive in terms of return prospects, the safety of the capital that they ensure at all times makes even the most aggressive investor put a small pie in the same.

Utilities of Fixed Deposits

• It remains a safe heaven for investors as you are assured of getting back the invested capital along with some returns over it
• The fixed returns keep out the fluctuation of returns that you could witness when investing in riskier products like stocks and mutual funds
• You also have the option to open a tax-saver fixed deposit wherein the lock-in period is 5 years. Investments made in this will qualify for tax exemptions under Section 80C of the Income Tax Act

Things to Keep in Mind While Investing in a Fixed Deposit

• Ensure you invest in a fixed deposit of banks instead of non-banking finance companies (NBFCs) even as the latter can offer you greater returns. The reason being the rating of instruments offered by most NBFCs has come down in the wake of events like IL&FS crisis. So, you may come across a situation where you want to withdraw but won’t be allowed to do so as the concerned NBFC would like to have sufficient cash to deal with an insolvency like situation. A year back, Dewan Housing Finance Limited (DHFL) disallowed premature withdrawals following the IL & FS crisis.
• While safety is a crucial element, the return part can’t be ignored at the same time. Do choose a bank that offers a maximum return for the period you look to invest in a fixed deposit.