Since the time immemorial, we human beings have been allured to the land. Historically, many wars and conflicts have happened just because of the land! Why? Because land has always been considered synonymous with power. We all tend to become greedy and insecure when it comes to real estate.
Considering our Historical past, having real estate was used as an asset class for the high classes but now it’s just an asset class for the masses. Millions of people are convinced that real estate is the best investment, but eventually, it’s like piling cash in your lockers!
It’s time to ditch this trend and focus on what actually will benefit you as an investor! In this blog, we’ll be covering a series of factors that will help you decide how mutual fund investments are ahead of the field of real estate investments.
What are real estate and mutual funds investments?
Real Estate investments are nothing more than a property that you buy or invest in. The property could be of any type like residential, commercial plot, etc. Purchasing land comes under real estate investment. An average return as per ET money provided by the Real estate is 10%.
Considering mutual fund investments they work as assortments for a particular asset class like equity mutual funds, debt mutual funds, and hybrid funds. The basic functioning of mutual funds includes a collection of money from investors, and a skilled mutual fund advisor takes charge of investing that money on behalf of them in either stock of companies or government instruments. The average return with mutual funds, specifically equity mutual funds is more than 10% and can range between 18% too!
Real Estate vs Mutual Fund: Which is better?
There are a series of factors, including the expertise of an investment consultant, that will help you to decide how mutual fund investments are ahead of the field of real estate investments.
- Performance of Investments
Evaluating real-time scenarios, the performance of real estate investments plunges far behind that of mutual fund investments. This is because real estate investments are more like FDs now as the returns generated by them are more or less fixed.
Whereas, mutual fund investments have become a more trendy and common option when it comes to making investments. This is because despite inflation the option of wealth creation works here, in favor of investors. During inflation, real estate investments fail to perform or provide returns, whereas, mutual funds with the power of compounding helps in generating good returns.
- Litigation Process
Who would want their investments to face a legal dispute or litigation? No one! These litigations go on for longer tenure and thus, the procedure can become monotonous for you as an investor. Not only this, you might end up spending extra money during the dispute. This process will lower your returns and eventually, your property will also go down.
In the case of Mutual funds, a litigation scenario is highly unlikely. Why? This is because they are well controlled and regulated by SEBI (Securities Exchange Board of India).
- Tax Implications
Tax exemptions lie under both real estate investments and mutual funds. But the question is which investment provides major exemptions?
Once again, mutual funds outshine real estate investments as they are known to be tax-saving investments among investors. Mutual funds can help you save a sum of 1,50,000 under section 80C.
Real estate, on the other hand, helps you save tax through indexation. Under indexation, your tax will be lowered by considering the impact of inflation on the value of your real estate.
- Liquidity
Apart from saving taxes, investors do wish to make investments that liquidate their funds sooner. The liquidation process of mutual funds is easy as it allows you to liquidate your funds to sell them through the online market whenever you need funds.
In the case of real estate investments, the liquidation process is problematic. This is because, unlike mutual funds, real estate investments don’t have a market that allows you to complete your transactions.
- Returns on Investments
As mentioned before, with the guidance of a skilled mutual fund consultant, returns generated by mutual funds are higher than real estate investments. The average returns in real estate range from 8% to 10% annually. Considering mutual funds, they provide returns ranging from 14% to 18-19% per annum. This solely depends on the type of mutual fund you are investing in.
Also Read: A Complete Guide to REIT Investing
