REAL ESTAE OR GOLD ?

INVESTMENT IN REAL ESTATE OR GOLD
Q. Is there a correlation between stock market and
property market? If the stock market crashes, will
sentiments turn negative in property market?
A. The answer, however, is not as straightforward as you
might think. Yes, there is, but not much. There are
different demand drivers for different real estate
sectors. The stock market performance and its impact
on general sentiments is only one of the factors.
There are many other factors that also reduce the
correlation. There can be two scenarios - in the first,
if the market goes up, resulting in excessive profits
being invested in the real estate sector. In the second,
the market goes down and investors shift their focus
from the stock market to real estate for safety
reasons.
Q. Ideally when should one invest in real estate? What
are the factors that would suggest that the time is
right to invest in real estate? :
A. The best time to invest in real estate is while the
demand for property in particular location is likely to
increase and prices are still low, and the possibility of
appreciation is high. If prices are already high, they
will eventually plateau out. Another factor to consider
is when you want to diversify your portfolio.
Q. Considering the high rates of interest on home loans,
are there going to be any long-term repercussions on
the real estate market?
A. Interest rates on home loans have risen, and may rise
by another 50-100 basis points within 2 to 3 months.
But this does not change the fact that people need
homes, as well as opportunities to invest. It only
results in people buying smaller homes in lesspreferred
locations, which is what is happening now.
Q. What kind of gold should I buy?
A. The answer, however, is not as straightforward as you
might think. What you buy depends upon your goals.
If your goal is simply to capitalize on price movement
with tax treatment of Mutual funds, then buy Units of
Exchange Traded Funds (Currently UTI Gold Share
and Gold Bees of Bench Mark are traded at NSE).
These offer profit potential just like tracking gold
price.
If you want leverage effect also then buy Gold Futures
at NCDEX or MCX.
If you want to convert gold into ornaments , then buy
physical gold.
Q. When should I buy Gold or Property?
A. The short answer is 'When you need it.' You cannot
approach gold or property the way you approach
equity investments. Timing is not really an issue. The
real question is whether or not you feel the need to
diversify your present portfolio with gold or property.
If you feel the need, the best time to start is now. It is
better to be a day early than an hour late.
Q. Is investment in gold is an insurance against odds?
A. Gold's baseline, essential quality is its role as the only
primary asset that is not someone else's liability. No
matter what happens in this country, with the Rupee,
with the stock and bond markets, the gold owner will
find a friend in the yellow metal something to rely
upon when the chips are down. In gold, investors will
find a vehicle to protect their wealth.
This is precisely what people have discovered during
countless crisis situations over the centuries and in
financial meltdowns in recent history like the Pacific
Rim in 1997, in Argentina and Brazil in 1998, in
Turkey in 2002, and in the Middle East during Iraq
war. When crunch time came, those who owned gold
understood that gold is gold.
Q. What percentage of my assets should I invest in gold?
A. Once again the answer is not cut and dried, but a
general rule of thumb is 10% to 20%; and how high
you go within that range depends upon your analysis
of the current economic, financial and political
situation.
Obviously, the individual with a low level of concern
about the current economic situation will tend toward
the 10% level. Those with lagging confidence in the
way things are going will gravitate to the higher end of
the range.
Q. Can you briefly describe what you believe to be the
biggest mistake investors make when starting out as
gold owners?
A. The biggest trap investors fall into is buying a gold
investment that bears little or no relationship to his or
her objectives. Most often the safe-haven investor
simply wants to add gold coins to his or her portfolio
mix, but too often this same investor ends up instead
with a leveraged gold position.
Q. What about gold futures contracts?
A. Futures contracts are generally considered one of the
most speculative arenas in the investment
marketplace. The investor's exposure to the market is
leveraged and the moves both up and down are
greatly exaggerated. Something like 9 out of 10
investors who enter the futures market come away
losers. For someone looking to hedge their portfolios
against economic and financial risk, this is a poor
substitute for owning the metal itself.
Q. What is the best approach for the safe-haven investor?
A. If you want to protect yourself against inflation,
deflation, stock market weakness and potential
currency problems -- in other words, if you want to
hedge financial uncertainties, there are only two
portfolio items that will serve you in all seasons and
under most circumstances gold or property.