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Gold, Real Estate, And Bank – Detailed Comparison As Investment Option

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Making investments at the right time always comes with lucrative returns. It helps you gain financial independence on a long term basis against your hard-earned money. Luckily, we have various investment opportunities in Pakistan through which we can grow our money.

In Pakistan, there are basically three main options for people to invest.

  1. Gold
  2. Banks
  3. Real Estate

Usually, people seem to be confused among these three options. Some prefer gold as a good investment option, some believe banks can give them good returns, and some opt for real estate for their investment.

Today, we are going to compare these three options in detail so that our readers will have a clear understanding of the pros and cons associated with these options and it will help them to make an informed and rational decision about making an investment

Gold, Bank, and Real Estate – Detailed Comparison

Let’s observe the similarities between the three options. We have gathered some similar factors that can be seen in all three options. However, please note that the ratio and impact of each factor vary across the investment options.

Factors Gold Bank Real Estate
Capital Required Moderate Little (as low as Rs.500) High
Returns Moderate Low High
Taxes No Yes Yes
Liquidity High Depends on the bank account type Moderate
Volatility Moderate Low Moderate
Security Moderate High High

 

1. Capital Required

Initially, the capital requirement is the number of financial resources required to buy a specific asset or an investment. In general, the higher the capital, the higher the financial gains.

Banks

If we talk about Islamic banks, you can initiate your shariah-compliant investment with very little amount. You can open your savings account with capital as low as Rs 500. Moreover, you can add a little amount to your savings account every month to get more chances of good returns.

Gold

For investment in gold, you need a medium amount of capital. For example, as per the current rate, the 10gm of 24K gold is around 95,899. This clearly reflects that you need a moderate amount of money if you wish to invest in gold.

Please note that the prices of gold fluctuate on a daily basis.

Real Estate

In order to invest in real estate, you need to have high capital, but it’s totally worth it. In real estate, High capital income means higher financial gains. To initiate an investment in any real estate project, you need to have at least Rs 15 Lac or more.

 2. Returns

Returns are the additional amount that you earn from your investment. Every investment opportunity comes with its set ratio of return.

Banks

Banks usually pay lower returns to their investors because of the less risk involved in banks’ investment. The benefit of investing in Islamic banks is that even if you are not making profits, your original sum remains secure with the bank. Islamic banks don’t commit any fix returns

Gold

Gold funds offered around 11.43% returns worldwide last month and overall 18.51% in the last three months. However, this rate fluctuates continuously.

Real Estate

Real estate is one of the most profitable investment opportunities in Pakistan. This investment will not only make you an owner of a tangible asset but also offer ROI as high as 20% or more.

Significantly, the value of land appreciates over the passage of time. This appreciation means the value of your property will increase gradually.

 3. Taxes

Owning an asset certainly means you’ve to pay a certain amount to the government. Each investment opportunity has its own tax bracket.

Gold

As the owner of the gold, you are not eligible for any tax. However, being a Muslim, if you qualify for the zakat criteria, then you must have to pay zakat on your gold.

Bank

There are no charges on the principal amount in the case of banks. But banks do tax deduction on the profits you make by investing in banks. In general, banks in Pakistan deduct tax 10% if the return/profit paid to you is less than Rs 5 lacs.

Real Estate

Owning a property means you need to pay the property tax. The rate of taxation on a yearly basis is as follows:

  • For first-year, rate of taxation is 10%
  • For second-year, the rate of taxation is 7.5% if sold during the second year
  • If sold in the third year, the tax rate is 5%

 4. Liquidity

Different investments have different liquidity rations. Liquidity simply means how convenient it is to change your asset into hard cash. Some assets are convenient to convert in cash however some require a little time for this conversion.

Gold

Gold has the highest liquidity as compared to our other options. You can instantly sell your gold by visiting goldsmith. He will convert your gold into cash as per the rate.

Bank

In the case of investment in a bank, the liquidity of banks deposits solely depends on your savings account type. You cannot withdraw principal amounts. However, if you have a simple savings account, you’re allowed to withdraw cash anytime as per your need.

Real Estate

The liquidity in the real state can be either moderate or low, it basically depends on the type of property you own and the current market situation.

 5. Volatility

Volatility basically means how a certain market situation changes its trends. Some investment shows abrupt changes, while some investments work in steady markets.

For example, if we take gold, it’s volatility is moderate as the rate of gold changes with the price of the dollar in the market. Contrary, the volatility of bank investment and real estate is very low. Both of these investments follow a gradual and steady market trend.

 6. Security

One of the major factors of a lucrative investment is that it is safe and secure in all aspects. One should always opt for investment opportunities that are completely secure and legal. \

Gold

The gold market is full of scams and fraudulent activities. Always purchase gold from reliable and trustworthy sellers and never forget to receive the receipt of your deal. Always verify that the gold you purchase is original. There are many scam cases where people sold fake gold to people.

Another risk that comes with owning gold is the robbery. The rising crime rate day by day increased the chances of robbery. It’s necessary to keep your gold at a safe place and do not disclose the information to people. You can also opt bank lockers to store your gold.

Banks

Investments in the bank are safe as banks follow high standards of security in its premises.

Real Estate

The real estate sector is also full of cheating and fraudulent deals as same as the gold market. Like gold, the real estate industry is also full of scams. Always choose companies and builders that are reliable, renowned, trustworthy, and have a transparent track record. Before investing in any real estate project, do not forget to check if the scheme is authorized by all the relevant development authorities.

As you can observe after the detailed analysis of the most common investment opportunities in the country, each investment option has its own set of merits and demerits.

Many individuals lean towards gold as an investment. It’s easy, beneficial, and convenient. The returns are good which makes it one of the most selected forms of investment by Pakistanis.

Similarly, investment banking is profoundly mainstream among Pakistanis. This form of investment is practical and suitable for individuals who want to invest limited amounts in the marketplace

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