Investing in Real Estate Vs Mutual Funds: Which is a Better Investment Option?

Blog Published Date

23 January, 2024

Blog Author

4 mins read

Investing in Real Estate Vs Mutual Funds: Which is a Better Investment Option?

The times are gone when saving pennies from earnings was the only option to create wealth. Today, investing goes hand in hand with earning money, and why not? With so many great investment options available, people are looking for ways to grow their wealth. Two of the most popular investing options in India are real estate and mutual funds.

Real estate vs mutual funds have always been a topic of discussion in the investment market, creating a sense of dilemma among investors in choosing between investment options. For typical reasons like tax deductions and return on investment, they both are considered good options. However, deciding on the best between both requires some more understanding.

This article will explore some points to understand which option, real estate vs stocks, might be considered the better choice for investors.

Real Estate Vs Mutual Funds

Uncertain Returns and Risk on Investment

Investors must have heard this regarding mutual funds, that mutual funds are subject to market risks and required to be researched and understood carefully before investing. Well, this is because the returns on mutual funds are always different. One might earn significant returns in some months but might then earn doubled losses in the next.

However, if one wants steady returns, then one should consider real estate investment. Investing in real estate like ready-to-move-in properties or under-construction properties is not only a safer option against mutual funds but also helps them generate higher returns with rising prices for residential properties in upcoming years.

Growth on Investment

Both real estate and mutual funds are good investment options, but what makes one of them better than the other is how they grow. Real estate investments see steady growth, especially properties in urban/residential areas.

Contrary to that, the investment done in mutual funds keeps fluctuating as the stock market changes. It makes in real estate much more beneficial if one is looking for a safer and steadier investment option.

Portfolio Diversification

Diversifying an investment portfolio is considered the right thing to do for investors. It saves investors from bearing losses due to market fluctuations. However, over-diversification in investments like equity funds can also lead to the dilution of profits. The more one is investing in mutual funds, the more their profits will be affected because of diversification.

However, that is different in real estate investment, as all investor choices of investments in real estate do not fluctuate as per market and would not over-dilute their profits.

Expert Management Cost

Most of the mutual fund investors take the help of fund managers to manage their investments and make investment decisions on their behalf. It is done so because, in general, investors need to possess in-depth knowledge of mutual funds like fund managers. However, this fund management service comes with a cost that investors need to pay out of their fund assets.

But there is no such case of expert management or management fees while investing in real estate, as investing in real estate (buying land, residential property) is something that investors can do themselves.

Exhaustive Research

The decision ofinvesting in mutual funds vs real estate also depends on the amount of research the investor might have to do. Both investment options require the investor to research before they invest in them. However, researching for real estate investment takes less time and effort than researching for real estate. While investing in real estate, investors need to consider a few obvious points like their credit score, the location of the property and type of property they want to invest in.

While investing in stocks, several complexities like previous years' fund performance, company reputation, net asset value, qualifications of the fund manager, entry and exit loads, etc., need to be understood. All this information can create confusion for investors and create a sense of uncertainty in their minds regarding investment.

Is Real Estate Good Investment or Mutual Funds?

Investing in real estate and mutual funds is becoming a part of people’s lives. Some do it to improve their financial wealth, and others do it to create generational wealth. Whatever the reason, investing is an excellent habit to have.

But selecting which investment to choose is choice investors need to make, and it depends on them. If one can take risks and are ready to understand market fluctuations, then mutual funds might be suitable.

However, if one wants to have a safe investment option that has steady growth potential and leaves a generational legacy, then one knows that it is a real estate investment that they can go with.

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Disclaimer- This article is based on the information publicly available for general use as well as reference links mentioned herein. We do not claim any responsibility regarding the genuineness of the same. The information provided herein does not, and is not intended to, constitute legal advice; instead, it is for general informational purposes only. We expressly disclaim /disown any liability, which may arise due to any decision taken by any person/s basis the article hereof. Readers should obtain separate advice with respect to any particular information provided herein.