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Real estate refers to the land as well as any physical property or improvements affixed to the area which includes buildings, houses, landscaping, and the natural resources surrounding it. Real estate is considered an asset with the highest returns that is unmatched by any other asset class. We feel that real estate 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 history shows that the prices have always gone up sharply. This makes real estate one of the most favourite investment options among many investors.
On the other side, we have a different perspective on mutual funds. A mutual fund collects money from investors and invests the money on behalf of them. The pool of money so generated is invested in various asset classes such as debt funds and liquid assets. A mutual fund is an ideal investment vehicle for the people who do not know much about investing. It charges a small fee for managing investors' money. Mutual funds are considered to be very risky. People believe that investing in mutual funds and stocks is gambling.
| City | 10 years average real estate return | Fund Name | An average rate of return in 5 years |
| Delhi | 6% | SBI Bluechip Fund (Large Cap) | 18.04% |
| Mumbai | 12% | DSP Blackrock Micro-cap Fund Reg Plan Growth | 31.98% (CAGR) |
| Kolkata | 6.5% | Reliance Large Cap Fund | 17.86% |
| Pune | 7.2% | Aditya Birla Sun Life Advantage Fund (large cap) | 22.38% |
| Hyderabad | 4.3% | Mirae Asset India Equity Fund | 20.62% |
| Bengaluru | 7.3% | Canara Robeco Emerging Equities Regular Growth | 29.24% (CAGR) |
| Chennai | 6.8% | Magnum Midcap Fund | 28.95% |
While we compare the returns of real estate and mutual funds in the table above, we can quickly identify that large-cap equity mutual funds tend to give higher yields as compared to real estate in the long-term. These large funds historically have provided a decent rate of return for long term investment. However, moderate risk is involved in such investments, but it is advisable to invest for a minimum of five years of time frame to get the desired result.
Both mutual fund and real estate belongs to the growth asset category, and both of them involve risk. Their performances are highly dependent on the economy of the country. However, the equity mutual funds are less risky than the real estate as mutual funds are diversified. Sudden changes in one stock will not affect your entire portfolio negatively. You can switch from one stock to another and modify if some of the stocks in your portfolio are not performing well. Whereas, diversification and switching is not possible in the case of real estate as large amount is invested in one single property.
Mutual funds such as Equity Linked Saving Scheme (ELSS) offer tax benefits to the investors under Section 80C of the Income Tax Act. As per this section, you can avail tax exemption up to rupees 1.5 lakh if you are investing in ELSS. The mutual fund is the tax efficient investment option that can help you to reduce your tax burden while creating wealth.
Whereas, the profit received from real estate is taxable. However, the indexation helps to reduce the tax applicable by considering the inflation, but they do not give tax exemption like mutual funds.
Can you invest in real estate through mutual funds?
Real Estate Mutual Funds allow you to invest in real estate through mutual funds. They are favourable to small investors who are not able to invest in real estate directly because of a lump sum investment.
Can you lose money in a mutual fund?
A mutual fund invests the money that it receives from investors in various assets like debt, equity, commodities, real estate, etc. If any of these assets lose its value, then the mutual fund can also lose its value.
How do I start investing in real estate?
Is investing in real estate safe?
A real estate always serves as a safe, tangible asset to mitigate the risk in your portfolio.
Is investing in property a good idea?
A property can be less volatile than stocks and other investment options. It is a good idea to invest in property if you don’t want to take market volatility risk.
Is investing in stock worth it?
A proper plan and intense financial market research will help you to make your investment worth in the stock market.
Is it better to invest in real estate or mutual funds?
Equity mutual fund is better as compared to real estate as mutual funds offer diversification and flexibility.
Is it a good idea to invest in mutual funds?
Yes. Investing in a mutual fund is always a good idea as they offer diversification, the minimum amount of investment, a variety of products and impart a saving discipline in your financial routine.
Is it smart to invest in stocks?
Investing in stock needs intense financial market research. It doesn't mean you should not invest in stocks. It is smart to invest in stocks through mutual funds that mirror the stock market.
Is it the right time to invest in mutual funds?
It is a good time to invest in mutual funds when the market is down. The worse the market is, the better returns you are likely to get in the medium and long term.
Is land a good investment?
The rate of return for land is usually more than that of in a residential project. Therefore, the land is a good investment option.
Is mutual fund profitable?
Mutual funds help you to diversify your investment which saves you from the poor investment. However, it is advisable to plan mutual funds according to your financial goals.
Is property investment a good idea?
The investment made in property can generate ongoing passive income and can be a good long-term investment if the value of the property increases over time.
Is real estate a good career?
Yes, it is. Becoming successful and building a successful career in real estate requires hard work, and in most cases, requires a substantial commitment of time and efforts.
Is real estate a good investment option?
Real estate is generally a good investment option for long-term financial goals. You may even use it as a part of your overall financial strategy for building wealth.
Is Real Estate Investing worth it?
In-Depth research is needed before investing in any financial instrument be it real estate or mutual funds. If the cash flow is positive and the return you will get by investing in the property is good, then it’s totally worth it.
Should I invest in stock or real estate?
It is advisable to invest in stock than real estate because of the two reasons. 1. It is much easier to diversify a portfolio when you invest in stocks. 2. Stocks are more liquid than real estate.
What are the advantages and disadvantages of investing in mutual funds?
The advantages of investing in mutual funds are diversification, liquidity, ease of access, lower investment size. The disadvantages of investing in mutual funds are the market risk, dependency on portfolio managers, not suitable for short-term investment.
What does no-load mutual fund mean?
A no loan fund is a type of mutual fund in which the shares are sold without a commission or sale charges. The shares are directly distributed by the company, and there is no involvement of a third-party.
What is the average rate of return on real estate investments?
An average rate of return on real estate investment varies between 9.5 % and 11.8% depending upon the type of real estate.
Which mutual funds are the best?
There is a pool of mutual funds available in the market which have historically offered great returns to the investors. ICICI Prudential Value Discovery Fund, Birla Sun Life Frontline Equity Fund, SBI Bluechip Fund Mirae Asset India Equity Fund, are some of the best mutual funds preferred by the investors.
Why should you invest in real estate?
Real estate may provide better returns than stock markets with less volatility. Unlike stock market, you have direct control over your investment in the case of real estate.
