Physical assets offer a unique advantage over financial investments through their tangible nature and conversion flexibility. According to The Hindu, physical assets are touch-and-feel investments that are easy to relate to, making them appealing to investors. If investments in physical assets such as land or gold do not increase significantly in value, they can be converted into consumption assets. For example, unable to sell land at higher prices, investors can build a house for self-occupation, or convert physical gold bars into jewellery when returns are poor.
The primary disadvantage of physical asset investments becomes evident when work-related relocations occur. As reported by The Hindu, real estate investments are not portable, while financial assets maintain their liquidity across locations. The conversion process for physical gold into cash requires effort and access to secure storage facilities, with bank lockers not easily available for individual investors. The portability of gold investments depends on the investor's ability to rent bank lockers or alternative safe storage facilities.
For investors experiencing frequent work-related relocations, the analysis suggests prioritizing financial assets over physical investments. According to The Hindu, if you are likely to continually experience work-related relocation, then you must consider investing primarily in financial assets. While land investments can still serve as a parking mechanism for surplus cash, they should not be used to achieve life goals due to their liquidity constraints. The report emphasizes that real estate investment is not liquid, meaning investors may be unable to convert investments into cash at fair prices when needed for life goals.
Real Estate Investment Trusts (REITs) present an alternative approach to traditional real estate investments, offering market-based exposure while maintaining rental income potential. As reported by The Hindu, REITs are not a pure bet on real estate but are exposed to market risk as they are listed on stock exchanges. This means their prices can decline when markets experience downturns. However, REITs could be an optimal alternative to lumpy investments in real estate to earn rental income while maintaining greater liquidity compared to direct real estate ownership.
