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Which is the best investment- real estate, debt or equity?

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Which is the best investment- real estate, debt or equity?

Most people have doubts related to the best investment avenues, particularly amongst debt, real estate or equity. Equity, as observed by experts, can be a major winner for investors since it also has the highest risks. Investors who held onto their equity portfolios received higher returns which were almost double in comparison to fixed deposits. These returns also outstripped inflation. However, not everyone has a success story, particularly those who do not understand the market and investment strategies.

When it comes to fixed deposits, they typically have the lowest possible investment returns and the lowest risk component as well. The Fixed Deposit keeps your principal amount absolutely safe and in the stock market, there are risks of losing capital which are not there in case of fixed deposits. In order to compensate for lower risks, fixed deposits offer more steady albeit lower returns. However, fixed deposits make for a great way to compound your money and grow your wealth in a risk-free manner.

Debt mutual funds also offer higher returns as compared to fixed deposits. These funds usually deploy investments across corporate and government bonds. Based on the security mix, average returns range between 9-11%. However, there are risks with debt mutual funds. In case of commercial property, there is a higher possibility of earning returns and lower risks. However, liquidity challenges are there, i.e. selling off property is difficult outright. Investors in commercial property usually get returns between 7-8% annually and these may go up each year, depending on the market, location and so on. There is also capital appreciation of property which leads to an increase in net worth.

If property is chosen in the right manner, the downside based risk, i.e. returns/values going down can be minimized. The best commercial properties offer 15-25% annually and 8% is the threshold at the base end on an average. The increase in rentals safeguards the investment in terms of inflation. In usual cases, TDS is paid on fixed deposit interest and overall taxes go to 33% while 21% is what is taxed on rentals. Capital gains arising from property come with 20% in taxes.

 

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