Deciding between investing in gold or in land depends on multiple factors and the personal situation of each investor. Both assets have the potential to generate long-term profits. Here's what you need to know to make an informed decision.
Land in sight?
When thinking about land as a possible investment, it is advisable to take into account several factors such as the location and the accessibility, its use and construction permits, and even environmental aspects.
It is important to look for areas with solid growth prospects, such as regions with a considerable growth population, fast development of their infrastructure or a growing demand for housing. Furthermore, accessibility to services, transportation and the proximity to cities is essential to ensure a good investment.
It is also crucial to understand the current and the potential uses of the land. In that sense, it is necessary to inquire with the local planning offices to determine if the land can be used for residential, commercial, agricultural or mixed purposes. It is important to be aware of any restrictions or development opportunities that may affect the investment.
On the other hand, it is essential to evaluate environmental risks, such as flood zones, pollution or protected habitats. To do this, it is advisable to hire a specialized consultant who can assess the potential liabilities and ensure compliance with environmental regulations.
Challenges and Risks When Investing in Land
Although investing in land offers certain advantages, it is also relevant to consider the possible drawbacks that can negatively impact the investment:
Investing in land typically requires significant upfront costs. Substantial capital is needed to purchase the land and to cover the associated expenses, such as notary fees, taxes and maintenance. Simultaneously, land investments carry risks such as market fluctuations, regulatory changes, and the physical maintenance of the property.
Although the value of lands tends to be more stable than other assets’, they are not immune to market fluctuations. Economic conditions and changes in government policies can influence land’s prices, potentially impacting the return on investments.
Finally, there is liquidity. Selling land can be a time-consuming process, requiring extensive documentation and negotiations. Investors should be prepared for long periods of holding, which may limit the liquidity of their investment.
Advantages of Investing in Gold
Unlike land, gold represents a more accessible investment and with a lower degree of complexity. During over 4,000 years, gold has increased in value over time, positioning itself as the asset par excellence to protect long-term savings.
Gold is a more accessible and stable investment, with a lower initial investment. You may start investing in gold with a relatively small amount of capital, making it viable for most investors.
The price of an ounce of gold increases when the purchasing power of fiat currencies decreases due to inflation. When investing in gold, investors can protect themselves against the loss of purchasing power. Gold can also help to effectively diversify an investment portfolio. Its low correlation with stocks and bonds performance helps spread financial risk, providing stability in times of economic turbulence.
While investing in gold has been a popular strategy throughout history, knowing how to properly do it is crucial. When investing in gold jewelry, for example, you should first consider that its price includes a high profit margin in relation to the value of the metal used in the piece. And when you decide to sell them, the process can lead to prices below the market value.
On the other hand, acquiring gold coins can imply an extra cost of 20% to 33% over the spot price due to the manufacturing and marketing costs. Keeping gold coins at home, just like gold jewelry, entails risks of theft, underscoring the need for insurance or a bank safe deposit box.
When selling your gold coins, the listing process at pawn shops and specialized businesses can be overwhelming and often the prices offered are below the spot price of gold, even at banking institutions which may reject the purchase due to alleged imperfections.
Finally, gold is an asset with much greater liquidity than land. If you need to liquidate your investment, gold is easily sold in a matter of days, either through companies dedicated to the purchase/sale of precious metals, or through numismatic houses. However, it is important to first investigate the options available to you, in order to negotiate only with companies with a solid reputation, capable of valuing your piece based on its actual weight in gold, and applying a minimum margin on its market price.
When wondering if investing in gold or in land is better for you, you now have the elements needed to make a broader and better informed decision. While investing in land requires careful consideration of numerous factors and entails high costs and risks, investment in gold offers a simpler, more accessible and reliable alternative.
Protect your Money
Aktagold's mission is to help people around the world protect their money from the economic and financial instability of their countries of origin, giving them access to savings in physical gold kept in the most secure vaults in Canada, an option that previously used to be reserved only for those with the highest income.
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