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Real Estate vs Mutual Funds, which to choose?

If you are a novice to the real estate industry or are willing to invest for the first time, this question must have popped up in your brain a hundred times already. The ever-dwelling battle between the most rewarding form of investment has never found an easy answer.

Real Estate, being more historic in nature has always been in demand since ages. Owning a plot of land and eventually turning it into residential and commercial properties have been voted as the best form of long-term investment. This obsession with investment in real estate has been synonymous with the steep increase in the price of real estate. This was a continuous process until 2011 when the impact of recession Great recession lingered over the prices of real estate. Though many individuals continued to invest in both residential and commercial real estate even then, it slightly paved the way for other forms of investment as well.

Mutual funds, on the other hand, is a form of investment program which is funded by the shareholders. Investors in mutual funds can either be individual or institutional in nature. Since mutual funds are managed by an asset management company and bring together individuals who invest their money, bonds or other securities, it is often viewed as a risky form of investment. Also, there is a consensus in the belief that the returns from mutual funds are inconsistent and less in comparison to real estate.

Let us look at some of the parameters which will help you decide better between the two as a better form of investment.

  • Better Returns

Returns in Real Estate are subjectable to factors like location of the property, the condition of the property, building structure (applicable for both residential and commercial property), amenities available, market rates etc. among many others. However, what makes real estate investment apple of the eye for investors is that the returns from real estate are very opaque. Also, returns from mutual funds are instant, though risky as compared to real estate. Thus, it is advisable for a first-time investor to invest in real estate initially, and then gradually shift to mutual funds for the instant, constant and big returns.

  • Risk on Returns

It is only a matter of perception that real estate returns are less risky than mutual funds. Returns on every form of investment are totally dependent on time and market values. As mentioned in the previous point, a commercial or residential real estate will provide desirable returns if only they fulfil the of location, situation, condition etc. hence, it can be just narrowed down to a matter of choice, if the time period for both the form of investment is the same.

  • Money Factor

While investing in real estate requires a lot of money all at once, investing in the mutual funds comes easy with a small amount of money as well. Thus, one can start investing in real estate since a younger age, so that by the time a huge return can be expected from the mutual fund, the investor can target the same money towards a fruitful real estate. The bottom line is that the money factor in both the form of investments is fruitful, depending upon the duration and market situation of the investment.

Real estate or Mutual funds, the consensus remains in the idea that investment in a residential/commercial real estate should/can be flowed by investment in SIP or mutual funds. The returns from the latter will take care of loans if any taken for the development of the property.