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Real Estate vs Equity Mutual Fund Investment

Be aware of little expenses, a small leak will sink a great ship.

-Benjamin Franklin

When you think of investing your money, your parents would suggest investing in gold or real estate. But slowly people are getting to know what equity investment is and they select it as a good tool to invest in. Earlier people used to see equity as a risky tool to invest in because they used to consider real estate as a safe investment. But the fact is both investments give gains in the long term. But nowadays due to the instability in the market, equity is the preferred option.

For decades real estate has generated consistent wealth and long-term appreciation.

By investing in stock you can receive ownership in a company. When market conditions are good, you can earn a profit.
A good compromise to choose between investing in the stock market or investing in real estate is in the hands of investors, so be wise when you invest.

Demerits of Real Estate:

  1. Low liquidity: Real estate involves risk because in case of emergency one can’t sell the property immediately. Real estate requires time to liquidate the property.
  2. The market is unpredictable: Market changes every now and then, where you can sell your property more than 10 times its original price. But that could go vise versa also. So think twice when you invest in real estate.
  3. Fear factor: There may be chances of property disputes, your property can be seized, so buying property has a fear factor.
  4. Ancillary expenses: Expenses such as maintenance cost, tax to pay, brokerage charges, and many more have to be paid.

Real estate vs. Mutual funds.

  • The risk:

We all know that both mutual fund and real estate belongs to the growth asset category, and in both risks is involved. The performance highly depends on the economy of the country. Where in comparison with real estate equity funds are less risky because equity mutual funds are diversified in nature. Where if there is a sudden change in the stock market the entire portfolio will not affect. One can switch from one stock to another and can also modify if some of the stocks are not performing well. Where diversification and switching are not possible when it comes to real estate.

  • Unpredictability:

Real estate investments are very unpredictable. We have the wrong notion that real estate is always safe to invest in but sometimes the investor may not get the expected returns as per expected him.

Mutual funds seem risky by nature but that is not true. Because there is the various category you get when you start investing in mutual funds.

  • Tracking investment is not feasible:

Unlike a mutual fund, the investor cannot track their investment in real estate.

In mutual fund tracking investments online could be an option where the growth and decline of the investment could be known by the investor.
In real estate, such tracking is not possible. This creates a risk in investment as the investor cannot track the investment.

  • Real estate needs large funds:

Real estate requires an investment of large amounts.

Where one can start with the SIP option while he is investing in mutual funds.

  • Compounding power:

In mutual funds, you have the benefit of compounding. Where this gives very good returns to the investor.

The benefit of the compounding effect will not be there if they invest in real estate. Even today real estate is considered by people as a symbol of security. And this could be debatable. As the above points suggest, that mutual funds are a better option if you consider diversifying your portfolio.

 

When one invests in equity mutual funds they do get benefits to tax efficiency as compared to other investment types. Investing in a mutual fund required a very small amount of money. Where in the SIP plan, money gets automated debit from one’s account. As all mutual fund companies come under SEBI, the investment made in a mutual fund is safe and transparent.

Start investment into Equity Mutual funds, where Finity is the best platform to invest your funds.

Think investment!! Think Finity.

real-estate

Real Estate vs Mutual Funds

“Put your money in land, because they aren’t making any more of it.”

-Will Rogers

A famous quote that many people believed in. People could not stop bragging enough of how their land and houses which cost peanuts before, were worth so much in a few decades. We’ve all heard the stories and rantings, but is it really true? Mr. Will Rogers, the famous American actor, made this quote in April 1930; over 80 years back! Since then there was a World War, India gained independence from the British and went through fourteen Presidents. How relevant are his words in our present scenario?

Most of us are familiar with the past stories of real estate; how a piece of land in the 60’s cost peanuts and is now worth a thousand times more but is that the story? Real Estate is still considered one of the greatest investments because it provides several tax incentives, it can be financed or used to leverage for cash when needed. But that’s not all that it has, let’s look at the other side of it.

The value of real-estate is clearly unpredictable; the property you buy today may be worth 10 times more or completely worthless years from now. There is a tremendous amount of time and energy that you spent on real estate with payment of taxes and utility bills, keeping it in good condition and also selecting new tenants as and when needed.

It allows the investor to gain value through modifications, but such value add-ons do not guarantee you anything in return. The everyday news carries dispute cases that have been under litigation for years for fraud, title, contract breach, etc. It can be used as leverage for cash, but when looking to sell it, it is difficult to find a buyer and the urgency of the situation may lead you to sell at a much lower value.

Still, do you want to put your investment in Real Estate? Let’s look at the current market. The total demand for urban real estate is estimated at 4.2 million units during the period 2016-2020 across the top cities in India. Sounds great right? But know this too, over 4.5 lakh homes remain unsold in the cities of Gurgaon, Noida, Mumbai, Kolkata, Pune, Hyderabad, Bengaluru, and Chennai, despite the huge demand in the market. The homes are either priced higher or are not placed in a good location. Considering all of this, real estate is not the best investment.

But how about Mutual Funds?

This is a vehicle to invest in diversified avenues of investment. It has the added benefit of cover from inflation in the market, and the premise of diversification there is much less to worry about. Mutual Funds has a range of funds that cater to the investor’s return and risk appetite which is professionally maintained by the fund manager. It provides various tax benefits and has high liquidity. Moreover, the number of AMCs has doubled over the past 3 years or so, and according to the Association of Mutual Funds in India (AMFI), over 70,000 new distributors have started to offer mutual funds over the recent years. Now that is a market worth investing in!

If rewards are the cheese and you are the mouse looking for it then Real Estate is the trap that promises you the tasty treat that tricks you to an investment that is ultimately a liability. The pain of dealing with realtors, settling legal disputes, having to put all your money with no immediate benefit is not what you need from an investment. 

Don’t invest in better, invest in the best!