In the variety of investment options in India, gold and real estate have conventionally carried substantial cultural and financial significance. Fixed Deposits (FDs) have been favored for their low-risk profile and simplicity.
However, equities have recently emerged as a robust alternative to these conventional selections. While each investment option has its unique merits and challenges, the increasing attention towards equities is noteworthy.
Here are five compelling reasons why equities stand out as a superior option compared to FDs, gold, and real estate:
Liquidity and Transactional Ease
Equities, or stocks, offer easy buying and selling on the stock exchange during business hours. Trading individually or through mutual funds allows for flexibility, with minimum investment amounts as low as Rs 500 for SIPs or any value for direct equity.
In contrast, real estate involves intricate processes, legalities, and substantial capital commitments. FDs, though requiring a lower initial investment, may pose challenges in withdrawals due to redetermined maturity periods.
Historically, equities have consistently delivered higher returns than FDs, gold, and real estate, positioning them as a more lucrative long-term investment. The potential to outpace inflation ensures the preservation of purchasing power.
Costs of Maintenance
Equities do not incur maintenance costs, whereas real estate demands ongoing upkeep, and gold may involve storage expenses. Physical gold, in particular, can depreciate due to additional charges. While FDs have minimal maintenance requirements their relatively lower returns and penalties for early withdrawals might diminish their attractiveness.
Equities, especially ELSS mutual funds offer tax benefits under Section 80C of the Income Tax Act, 1961, providing an annual deduction of up to Rs 1.5 lakh. Additionally, equities present opportunities to offset short-term capital gains against losses, offering additional tax-saving advantages.
Gold and real estate lack comparable tax benefits, and while FDs provide deductions under Section 80C, they come with restrictions.
Equities provide more diversified investment options compared to gold, real estate, and FDs. Capital allocation across various sectors, industries, and regions allows for flexibility and risk mitigation. Gold investments are typically limited, and real estate investments often lack diversification across different assets or locations. FDs, considered a safe option, lack diversification altogether.
In conclusion, equities offer diverse investment opportunities, tax advantages, and the potential for returns that outpace inflation. They present a compelling option when juxtaposed with FDs, gold, and real estate, catering to varied financial goals.
Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.