Any investment should be made as per their appetite, balanced with the risk and reward model. If compared with real estate vs fixed deposit, it is a combination of low risk, medium risk, and high risk considering its term of duration and appreciation of money or money’s worth.
FIXED DEPOSIT IS A SAFEST FORM OF INCOME
Fixed deposit is always considered the safest form of investment with a fixed rate of returns. FDs have a lock-in period of a minimum 5 years or as per the bank standards with a fixed rate of return starting from 3% up to 7%. The appreciation of the money is fixed. FD is chosen for moderate returns among the two.
FD are financial instruments that offer more ROI than any other savings from banks. FD are considered risk-free with good interest on investment as they have low liquidity and a lock-in period.
However, a comparatively newer instrument called Flexi-FD allows people to go for the interest rate of an FD and liquidate.
In real estate, one needs to invest with huge lumpsum money for a property but in FD it depends on our investment capacity and expect a fixed return.
Some banks’ FD Rate of interest starts from 3% to 7% for some senior citizens up to 8% in some international banks with a lock-in period from 6 days to 10 years which differs from bank to bank.
FD are taxable if the rate of return exceeds 10 thousand per annum with a tax percentage of 10% on the taxable amount. This is known as TDS Tax Deduction at Source
REAL ESTATE A LUCRATIVE FORM OF INVESTMENT BUT RISKY
Real estate should be considered a kind of portfolio that is always the first choice for investors to make money and wait for a certain duration to appreciate. It is a combination of low risk and high risk, It sheerly depends on the market trends and waiting period. Now due to the demand and supply with soaring prices, investors tend to make a very meagre return on investment with a risk involved in it.
Not everyone can invest money in real estate, it requires a huge sum of money and expect returns as per market trends.
In the real estate sector purchasing a property requires a lot of patience and a waiting period which involves property identification physically, evaluating the property legally, stamp duty, fees, mutation charges, etc involved in it.
For an appreciation of the property, some factors play a crucial role, it depends on the locality, infrastructure, road connectivity, market trends, and wait-and-sell concept.
Nowadays trend in buyers of commercial property has increased many folds which is lucrative and risk-free with an appreciating rate return as per market standards.
Return on investment on land has less scope and is very much low with meagre 2-3 %
Selling a property takes time and may not get an expected rate of return and may give unexpected growth.
So one must evaluate the risk appetite and diversify the investment in various sources of income channels. Always diversify the risk and balance the portfolio. Partial money into Real estate, FD, Flexi FD, mutual funds, debt funds, equity funds, sovereign gold bonds, and various other sources of income.