Choose Rightly, Invest Wisely!
There is an old saying by Mark Twain, "Buy land, they're not making it anymore." From the ancient civilisations, we have seen kings fighting and conquering lands, which symbolised their power & wealth, right from the days of Alexander to Hitler. As Gandhiji rightly said,"Earth provides enough to satisfy every man's need but not every man's greed." This mindset continues in modern times also. There are many who still think owning a land or property is accumulation of wealth. So, there is a misconception that only real estate investments are better than any other investments. Well, to this, a simple answer on a lighter note would be, people in ancient times didn't have mutual fund investments as an options so they invested only in land.
But on a more factual basis, our team at Wisely Invest have come up with some points referring to Real Estate vs Mutual Fund.
What is 'Mutual Fund'?
A mutual fund is an investment vehicle made up of a pool of money which is collected from many investors, to invest in securities such as stocks, bonds, money market instruments and other assets. These are operated by Professional Fund Managers, who allocate the fund's invested and produce capital gains and income for their investors. As mentioned earlier, mutual fund is a systematic investment option wherein they give small or individual investors access to professionally managed portfolios of equities, bonds and other securities . This is not in case of real estate investments.
According to the Forbes magazine, real estate investments are an underperforming asset class.
A majority of properties either give more or less the same returns as a fixed deposit and can barely beat the inflation. Also they are an Unpredictable asset class. This is a fact which everyone understands. Prices of property are generally derived by its location. Windfall gains come to extremely lucky people or those who have prior knowledge that a particular area is about to experience a development boom. In every other occasion, real estate remains an underperforming and unpredictable asset class with huge periods of stagnation. Also, real estate are only for big investors. The other major difference is the liquidity. In a mutual fund, if you ever want to get out, all you have to do is instruct your respective fund house or even your financial advisor. They can sell it and the fund house transfer's the funds in your account just by one sign. In just a couple of days your amount is directly credited in your bank account. Whereas, in real estate, liquidity is not guaranteed. When urgent cash is required, one might not find a buyer or an urgent sale may fetch less gain or even incur a loss. Also real estate is a blunt asset class, it cannot be easily divided between members of next generation. Both harmony and liquidity can diminish. This makes mutual funds more beneficial.
Also, investors in real estate experience litigation issues. E.g., government entity wanting the land for a public project, loopholes in government records, family disputes, tenants encroachment, anti-social elements etc. On the other hand, mutual funds are professionally managed investments, and you can find a mutual fund that matches almost exactly what you are looking for investment in accordance with both your risk tolerance and your investment horizon. The mutual fund investments can be a great wealth generator.