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Why investing in stocks is better than real estate

By P V Subramanyam
September 28, 2014 10:33 IST
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Investing in stocks offer secrecy, partial liquidity and freedom to invest even a small amount, says P V Subramanyam

Many people ask me this question. Subra why should we invest in equities and equity funds only? My logic is simple.

You save in post office instruments, bank fixed deposits, etc. You invest in asset classes which fluctuate in annual returns.

So when you put money in equities, gold or real estate you are investing. Along with investing comes risk.

Now if you have invested in a house, you get rental yields regularly and hopefully the price of the house will appreciate.

If you invest in gold, chances are you will get some appreciation at the end of an 'n' period.

It is only in equities that you can handle Rs 1000 crore buying or selling in less than one minute.

Imagine doing a transaction of that size in a information scarce market like real estate. It is impossible without letting half the world know that you need to do a transaction!

It is only in equities that you can get partial liquidity.

If you have a house with a market value of say Rs 3 crore -- it is not possible to sell Rs 40 lakh out of that house. Either you sell in full or nothing. Of course you can borrow against the property -- but to me that feels like paying interest on money that you have in another form! Very high and usurious rates make such a transaction difficult / expensive.

You can start small -- as little as Rs 500 per month -- a SIP in a mutual fund. There is no such product available in real estate. Real estate calls for a huge loan commitment -- upfront if you want to do a transaction.

One should be worried about not having the cash flow to be able to pay the EMI.

In case of a SIP if you do not have money you just stop the SIP with no penalties!

Illustration: Uttam Ghosh

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P V Subramanyam