Published On: Fri, Jul 29th, 2016

Mutual Funds vs. Real Estate: Which One is the Best for Your Investment?

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Mutual Funds or Real Estate? Most of the investors are not sure which is the best way to invest their money for good returns.

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Whether I should invest in mutual funds or real estate?

A question most of the investors must have thought at some point of their carrier or still pondering over that. It is so interesting that you can organize a debate over that with the title, Mutual Funds vs. Real Estate. But it is still doubtful that you may end up with the best option for investment.

There may be many blogs floating over the net that advocate mutual funds over real estate. Similarly, there are tons of online piece of writings considering real estate as the best investment decision. However, most of the investors can’t make the decision as they are in dilemma. It simply means that the question is still unanswered.

Whether I should invest in mutual funds or real estate?

Interestingly, you and only can know the answer!

First of all, let’s know the basic info about both mutual funds and real estate.

What are Mutual Funds?

A definition of mutual funds by Investopedia goes like that-

“A mutual fund is a collection of stocks and bonds. When you buy a mutual fund, you are pooling your money with a number of other investors, which enables you (as part of a group) to pay a professional manager to select specific securities for you.”

You can understand this by the nice example set by Moneycontrol.com
“Buying a mutual fund is like buying a small slice of a big pizza. The owner of a mutual fund unit gets a proportional share of the fund’s gains, losses, income and expenses”

The benefits of mutual funds include high returns, diversification, safety and transparency, tax benefits, and liquidity.

You may have heard this line “shares are the subject to risk” and investing in mutual fund is no exception. Since the returns are depend on the market conditions, a fluctuation can affect your returns.

What is Real Estate Investment?

As the name suggests, real estate investment means putting your money on the property for profit. In simple words, it is the business of owning and managing the properties for rentals and sale. You can either buy residential property or can invest in commercial property.

The real estate market in India is driven by housing demand and supply, home market values and affordability.

Like mutual funds, real estate investing has its own benefits and downturns. Let’s begin with the advantages which include better returns, easy loans, potential of earning money, tax benefits, home appreciation and a degree of protection from inflation.

On the flip side, it is risky business because of high transaction costs, low liquidity, constant property management and maintenance and above all the fluctuation in property market.

Before Investing in Mutual Funds……..

  • Read and research about the particular fund scheme before making your investment.
  • Know the hidden charges and fees like transaction cost, sales and purchase fees, fund managers expenses and advisory fees.
  • How much risk can you take?
  • Know about the tax rebate associated with the mutual funds.
  • Study the property market carefully and know the demand and supply rate.
  • Set the goals which you can fulfill.
  • Check if the property or land has legal dispute.
  • Check your finances and savings.
  • Your strategy to deal with risk.

Before Putting Your Money in Real Estate……..

  • Study the property market carefully and know the demand and supply rate.
  • Set the goals which you can fulfill.
  • Check if the property or land has legal dispute.
  • Check your finances and savings.
  • Your strategy to deal with risk.

In this way, both mutual funds and real estate are similar assets and require an investor to understand the associated risk factors and market study.

In other words, only an investor, on the basis of his experience and market condition, can answer the question of Real Estate or Mutual Funds.

About the Author

- Rahul Bedi is an editor at Savitry Greens a venture of NK Sharma Group. He loves to write about latest trends on real estate, home improvement and economy in India.

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