Investing is an important step, and there are two common ways: property or savings investments. Although they both can increase capital, savings and real property investments are separate processes with common pros and cons. In this blog, I will share with you the essential differences between bank and real investments.
What Are They?
Bank Investment: These are safe places to keep your money, and the bank pays you a small amount of interest in return. It involves savings accounts, time deposits, and deposit certificates.
Real estate investment: This means investing in buying property. It’s a more hands-on and risky way to invest.
Returns on Investment
Bank Investment: Bank investments give steady but lower returns. These returns are guaranteed and predictable. They might not keep up with rising costs in the long run.
Realty Investment: Real property can offer much higher returns, especially if the property is in a developing area. Selling the real estate for a higher price or by renting it out can help to make money. However, property values can change. It might go up and down.
Can You Get Your Money Quickly?
Bank Investment: They are easy to access. You can access your funds when required. However by removing money from specific accounts, such as fixed deposits, before the term completes might result in a fee.
Property Investment: Real estate is much less liquid. Selling a property can take time, sometimes months or even years, depending on the market which means you cannot get quick access to money.
Initial Capital Required
Cash Investment: You can begin with a minimal amount of money. It is easy for almost everyone to start saving or investing.
Property Investment: Property needs a lot of money upfront. This includes the initial deposit, legal fees, and other costs associated with buying. Loans can help, but they add extra costs because of interest.
Protection Against Rising Costs
Bank Investment: Bank investments usually don’t protect much against inflation. As spending increases, the worth of your money could drop.
Property Investment: Real estate is often viewed as a strong defense against rising prices. As prices increase, the value of property and rent typically rise, helping to keep or improve your ability to buy things.
Conclusion
Bank investments and real estate come with their benefits and drawbacks. Bank investments are a reliable way to keep your investments safe and easy access to your money. Real estate offers higher returns and better protection against inflation, but it is riskier and requires more money and effort.
The most suitable plan aligns with your targets, risk preferences, and the time and capital you can dedicate. In many cases, this may mean dividing the investments between these types to get the best of both worlds.