Which Investment is Better? Tangible Assets Vs. Bonds
Choosing an investment is usually not easy. As an investor, one must always choose the investment with the highest rate of return and minimum risk. However, other than the risk and the rate of return, there are other factors that investors look at before choosing an investment. The best way to know the suitability of an investment to an investor is by assessing its advantages and disadvantages and comparing it to alternative investments in the market.
Choosing between a bond and a fixed asset is not easy because both investments are more secure than other investments in the market. An investor needs to understand the benefits that come with each type of investment. That way, they can assess if that investment suits their requirement. Investors make investments with different goals, and it is, therefore, essential to make sure that the investment chosen matches the set goals.
Advantages of Tangible Assets
Diversification
Investors who want to diversify their investments should consider investing intangible assets. Tangible assets are usually not affected by market rates, such as the rate of interest. An investor with many financial asset investments that are performing poorly because of poor market rates can diversify by investing some intangible money assets. When market rates deteriorate, tangible assets can be used as a backup plan because they will still be generating good revenues.
Protection from Inflation
Investing in a tangible asset means that an investor will not have to worry about the rising rate of inflation. Over the past 100 years, the purchasing power of the dollar decreased by 95% while that of an ounce of gold increased by more than 2500 during the same time period. This shows that tangible assets can increase in value, even as inflation rates rise. This is one of the major reasons why investors choose tangible assets over bonds and other financial assets.
Personal Satisfaction
Tangible assets can serve multiple purposes. They can act as investments to generate income in the future, and they can also serve as sources of personal enjoyment. For example, a house can be an investment because when sold in the future at a higher price, it generates incomes for the owner in the form of profit. Additionally, the same house could be used to provide living facilities for the owner before it is sold. The same principle applies to other tangible assets. An investor is advised to choose tangible assets that can provide them with personal enjoyment besides income.
Advantages of Bonds
Bonds are preferred by investors who want investments that are easy to convert to cash. Selling bonds does not take much time compared to tangible assets. Therefore, they can be used to generate quick cash in case of an emergency.
Secondly, bonds are more secure forms of investment because they are regulated by the government. In most countries, bondholders are given priority to receive their money once a company goes bankrupt. Bonds are, however, more susceptible to market risks than tangible assets.
Which of the Two Is a Better Investment? Final Verdict
The answer to this question depends on the investor. Both bonds and tangible assets perform well in the market. However, their advantages are different, and it depends on what the investor is looking for. If an investor wants to evade market risks, intangible assets are better. However, bonds will perform better for an investor looking for a liquid investment.