Which is a better investment, Real estate Or Equity mutual Fund?

Real estate and mutual funds are two of the top investment options for the investors. Both are known to generate high returns, which attracts the investors to these sectors. However, many find it difficult to choose between the two. Both real estate and mutual funds have their own pros and cons, which often make it difficult to make a decision. If you have been facing the same conflict, this article would help you clear your doubts.

  • Returns: The returns one can enjoy depend upon the exact real estate or stock they invest in. If you buy the right real estate property in a strategic location, no or very few stocks can beat its profit. On the other hand, mutual funds usually have the potential of earning high returns in general. Not all of them generate as much income as a real estate property like the ones mentioned above, but most of them have a higher potential than most properties. However, returns from mutual funds are a lot less consistent than that from real estate. This may be unsettling for new and inexperienced investors if the market suddenly slumps and the values of the stocks fall.
  • Risk: This is the factor that makes people think twice before investing in mutual funds, even though it might bring higher profit. Mutual funds and stocks depend largely upon the situation of the economy. If the economy hits a period of inflation, the value of the stocks would fall and it may result in losses. While mutual funds are volatile, the returns from real estate are more assured. It doesn’t depend much on the economic condition. The location and other factors play an important role, but if you choose the property wisely, it is likely to earn you consistent returns. Unlike mutual funds and stock markets, the value of land in a particular location wouldn’t fluctuate much, neither would be the demand for properties.
  • Decision making: One of the reasons most find themselves more comfortable with real estate is that it involves easier decision making as compared to mutual funds. A home is something that one is familiar with since childhood and would find it easier to manage. On the other hand, investing in equity mutual funds involves a lot of planning and assessment. You would need an understanding of the sector if you want to ensure yourself high returns while keeping the risks minimal. If you are planning to invest in mutual funds, do note that you would need the proper skills in order to deal with the fluctuation of returns. One must learn to assess the situation clearly and decide to purchase or sale the stocks.
  • Hands-on effort: Equity mutual funds do not involve much hands-on effort. Once you have invested in one, you can literally just relax and enjoy the benefits, though you would still have to plan and take the decisions. On the other hand, owners of a real estate property must check on it often to ensure that their property is all right. In case if there are damages, he would have to get it repaired. Moreover, tenants might call up at odd hours to report such problems.
  • Risk of fraud: It is quite difficult for a fraud to siphon off your money in the real estate investment sector. The property is something tangible, which means that you can personally check if it exists, its condition, etc. On the other hand, you would have to rely upon the management in case of mutual fund investments.

The real estate industry is growing rapidly in India. This makes it a viable option for those looking forward to invest.


References: Media Reports, Economic Times, Press Releases

Disclaimer: This information has been collected through secondary research and Elite Landbase is not responsible for any errors in the same.

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