Best Investment Channel
Real Estate & Mutual Funds are both good options to invest money, but it depends on the investors and professionals from whom you take advice. Opinions vary and it’s only you who will decide at the end.
Returns are the first and foremost criteria based on which one decides the investment channel. Apart from this, the time period of investment or the time after which you will get the result matters.
In this post, we will be discussing Real Estate & Mutual to help you choose the best one for your investment.
Different people have different requirements & goals based on which they choose one specific path to invest & to manage their finances.
Let us understand both one by one.
Real Estate refers to the land, plots, as well as any physical property such as houses, buildings, landscaping, etc.
In India, real estate is considered as one of the major lifetime investments which gives high returns in the future. Along with this real estate has one more plus pint which is- it is less risky as it is a tangible asset and we have full control over it.
The demand for real estate is ever-growing and it is for sure that its price will never go down, hence you have assured returns.
A mutual fund is one of the best investment tools, which has gained popularity in the last few years. In mutual funds, money is collected from different investors and then the collected money is invested on behalf of the investors.
A mutual fund is an ideal investment tool for those who don’t have much knowledge about investment. A small amount of fee is charged against investing your money and you can relax for further.
Mutual funds are subject to market risk as the returns are affected by the market fluctuation.
Let us differentiate both on the basis of some factors.
When it comes to returns real estate investment needs a huge amount of money at once. For which 90% of the people opt for a housing loan. The repayment of housing loan includes interest on it and can prove to be much more than the principal amount. Suppose after repaying the loan, you decide to sell the property. The maximum return you can get for the same property can be 8% to 10%.
But when you choose a mutual fund SIP plan for 5 years the minimum returns you will get is 15% and a maximum you can get is 28%.
You can sell your mutual fund and money will be credited to your bank account, it can maximum day a few days.
But, In the case of real estate, selling of property can take months. Sometimes even after months, it is not possible to get the amount you expect. Moreover, the property holder needs to actively solicit buyers through advertisements or agents who charge some % from the amount property holder gets.
Under Section 80C of the Income Tax Act, Mutual funds Equity Linked Saving Scheme (ELSS) offer tax benefits to the investors. The amount which exempted ₹1.5 lakhs.
Whereas in the case of house properties, if you purchase the property using a home loan, you get a tax exemption on interest as well as principal repayment under section 80C and 24.
When the property is sold, you need to pay an LTCG at the rate of 20% after indexation.
So, which one should you choose?
If you are planning to invest your money, and still you don’t have a proper plan, this post will surely help you to choose one.
Over the long-term, real estate may deliver 4-5% over inflation except for your borrowing cost. Hence it doesn’t make sense to invest in some as an asset which gives you low returns that too after a long time. Buying a property to live in it is a good idea. But for investment purposes and to reach your financial goals, there are better options such as mutual funds. As mutual funds are more accessible, asset classes like equity and fixed income and after all Mutual Fund Sahi Hai.