Where to Invest Your Money? Real Estate vs Fixed Deposit
Undoubtedly, fixed deposits and real estate are the most popular ways of investing in many countries. Deposits and properties are popular because they are secure and easy to understand. Nevertheless, each of the two investment types has multiple advantages and disadvantages.Every investor needs to develop a good understanding of the different investment alternatives before investing his/her savings.
Pros of real estate:
+High annual returns in the long-term
+Protection against inflation
+Can be used as a collateral for a loan
+Two sources of returns - rental income and property appreciation
Cons of real estate:
- High transaction costs (agent/legal fees, taxes, time and effort)
- Illiquid asset (selling a property can take up to several months)
- No guarantee of returns (real estate prices can decline in the short-term)
Pros of fixed deposits:
+ Possible to withdraw money at any time
+ Fixed return
+ Secure for small amounts of money (government insurance)
Cons of fixed deposits:
- Low interest rate
- No guarantee for huge sums (banks can go bankrupt)
In summary, you should invest in real estate if you have a long investment horizon and want to generate higher annual returns on your savings. It is better to leave your money in a fixed deposit, if you will need your money soon (within 24 months).
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