In this article, we see which option is better mutual funds or real estate. When you think about investing your money, real estate or gold are the options suggested by your parents.
However, nowadays mutual funds have emerged as a very good option.
In India, real estate has taken off as an attractive investment option. This is caused by the problems described below with real estate. On the other hand, mutual funds have become very popular among investors. This is because individuals used to be very danger opposed.
This is one of the most talked-about questions from an investor’s point of view.
Real estate investments are very unpredictable. There is a misconception among people that real estate is an investment that will always go upwards. Values also go down. The primary reason for this is unpredictability. For example, 10 years ago the value of the land on the outskirts of a city may move upward due to the development of the area.
While the same area after development may not be very attractive to authorities due to the increase in traffic. Therefore, the value of a single plot of land decreases.
2. Real Estate is Underperforming
Real estate investments are significantly underperforming in nature. They offer returns less than or equal to the same rate as fixed deposits. Real estate investors often fail to bear the effects of inflation.
There is a possibility of your investment getting caught in a dispute or litigation. This turns out to be very dull and badly designed for the speculator.
In India in particular, it can last for years, so it becomes very difficult for the investor to face the situation. Ultimately, it is the destruction of the wealth of the investor who has invested his hard-earned money in the real estate market.
Mutual funds are not emotionally invested by the investor. They are invested through proper research. Also, for every fund, there is a fund manager, who is constantly researching the market and making investment decisions. On the other hand, mutual funds are not prone to this problem. Mutual funds are well regulated. Therefore the risk of the dispute is very low.
4. Emotional Investments
Real estate is usually an emotional investment. It is not only an investment of money from the investor but also an investment of memories and feelings that the investor has invested in a particular asset. Due to this, the investor faces the risk of two types of losses i.e., monetary well as emotional.
5. Investment tracking is not possible
The Investor can’t track his investment in real estate. Investors in which mutual fund is best can track their investments online and monitor the rise/fall in their investments.
In real estate, such tracking is not possible. This creates a risk in the investment as one cannot monitor the investment property.
6. Slow Returns
Real estate gives you comparatively lower returns than a one-time investment. For example, investing in immovable property of ₹ 50 lakh for 30 years will give you a lower return than an investment of ₹ 50 lakh in mutual funds for the same period.
7. Real estate needs big funds
Real estate requires a large amount of investment. The amount is to be invested in the property at one time. This can become a very risky option for the investor. A salaried employee may not have many funds at his disposal to invest in property.
Mutual funds, on the other hand, offer the option of investing in the equity market in lump-sum or small sums through SIPs at regular intervals. This amount is automatically debited from the bank account of the investor making this a very convenient option. Inventors get to know about SBI savings account interest rate in detail.
8. Liquidity Factors
Mutual funds provide liquidity to the investor. A market is available to investors to sell their investment. So, it does not take long to sell their investment and ensure liquidity.
In the case of real estate, a ready market to sell your property is not available. As an investor, it will take you more time to sell your property quickly. Therefore, if an investor needs money, real estate can become a difficult option.