Real Estate vs Mutual Funds: Some investors invest money in real estate for the long term and some prefer to invest in mutual funds.
Real Estate vs Mutual Funds: Many things have to be considered before investing and then after that investors make a list according to their own where to invest the money. Talking about the long term, some investors prefer to invest in real estate and some prefer to invest in mutual funds. Before starting the investment, there is confusion in the mind of the investors about whether it is better to invest money in real estate or mutual funds. Which of the two is better for you, its decision can be taken by comparing them.
Legal screws
One problem with real estate is the legal issue. If there is any legal problem with a property, then this matter can drag on for a long time. This also reduces the value of the property and your money may be stuck for a long time. On the other hand, mutual funds are regulated by SEBI, due to which the possibility of legal problems in it is very less.
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Supervision
If you have bought a property in partnership or have bought a property in a remote area, then its monitoring is very difficult and if you are not able to do so, then you may have to face legal problems. On the other hand, you can track investment in mutual funds online whenever you want whether your money is growing according to your goal or not.
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Finance
Investing in real estate requires a lot of money whereas in mutual funds one can start with a small amount. You can also start SIP in mutual funds with just Rs 500, which will be automatically deducted from your bank account every month and after some time you will have a substantial capital ready.
tax liability
One can avail tax benefits on investments in both real estate and mutual funds. In some mutual funds, one can avail tax benefits under section 80C on deposits up to Rs 1.5 lakh. Investors can save tax through indexation in real estate.
liquidity
Before investing money, investors also consider liquidity, that is, how soon they can get cash in their hands at the time of need. Mutual funds are more preferable on this criterion as exiting from real estate investments is a time consuming process. On the contrary, from mutual funds you can withdraw your money online whenever you want sitting at home.
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investment process
Investing in real estate has to go through a number of processes and paperwork. Apart from this, investors have to pay CERSAI charges, stamp duty, registration charges etc. In such a situation, it proves to be a very time consuming process. In contrast, investing in mutual funds takes only minutes. If you invest in this through SIP, then money will be automatically deducted from your bank account at regular intervals and there is no extra cost.
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Return
Investors remain attracted to real estate. However, for the past few years, it has remained a risky investment and is not yielding much returns. On the other hand mutual funds are giving high returns with moderate risk. Real estate is giving 7-11 per cent annualized returns while mutual funds can give 14-19 per cent returns, depending on the fund chosen. One can get great returns on investment in mutual funds over a long period of time as money grows compounding in it whereas this is not the case in real estate.
(Input: cleartax)
(Disclaimer: This article is for information only. Before taking any investment related decision, please consult your advisor.)
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