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February 18, 2024

Mutual fund vs real estate


Long-term investing requires proper homework because it does not offer many opportunities to overcome losses if investment goals are not met. According to tax and investment experts, when investing for the long term, one should first of all consider an option that can beat the average increase in inflation. It means that your investment vehicle should generate more than 6-7 percent annually. The performance of small savings schemes supported by the government has fallen over the last decade and people have started looking for other options like stock market, mutual funds, real estate etc.

According to investment experts, investing in mutual funds gives a return of at least 12 percent in the long run, while real estate investments give a return of around 8 percent in the long run. However, there is rental income associated with the property, which the investor can still invest in SIP mutual funds. Therefore, if an investor does not want to invest directly in the stock market, he can consider investing in mutual funds or real estate. But when an investor has to choose between them, the situation can become complicated.

Let's talk about mutual funds versus real estate; Pankaj Mathpal, MD and CEO, Optima Money Managers said andquot: If one has a surplus to invest, then in terms of returns, mutual funds are a better option for a long-term investor as they have a return of around 12 percent over the long term.15 years or more. However, in terms of real estate, the expected annual return in the long term would be around 8 percent. In addition, the liquidity of fund investments is easy, as money can be realized with a single digital click. But in relation to real estate, the realization and investment of one would be a bit long-term, because it is a physical process rather than a digital one, and in the case of real estate, there is no partial withdrawal.

Echoing the views of Pankaj Mathpaland; Co-founder and CEO of FinMap Kumar Binit said andquot; Real estate investments do not entitle the investor to earn interest if the investor receives interest. Managing mutual funds is much easier; Once you have invested for a certain period, you just need to check it from time to time. In addition, financial investing is now completely paperless, which makes it very convenient. There are several steps to managing your investment property after you buy it.

However, SEBI registered tax and investment specialist Jitendra Solanki said that real estate investment in commercial properties can facilitate the diversification and portfolio of investors if the rental income is invested in mutual funds under SIP mode.

After annual maintenance and payment of various service taxes, the average rent for a residential property would decrease by approximately 2.50 percent per annum, while for a commercial property, it would decrease by approximately 8 percent. So if an investor invests ? 30,000 in mutual funds, it would convert into around ? 1.65 lakh after 15 years at 12% annual interest. Similarly, 30 lakhs in real estate would turn into around 95 lakhs at 8% annual return (irrespective of residential or commercial property).

Rental income from residential and commercial premises is included for properties valued at Rs 30 lakh; Jitendra Solanki said andquot: While the monthly rental income for a residential property falls to around ? 6,250 [(2.5% of ? 30 lakh)/12], it jumps to close to ? 20,000 [(8% of ? 30 lakh))/12 ] for commercial property. So if an investor invests ? 30,000 in a commercial property, his monthly rental income would be ? 20,000. If this ? 20,000 is invested in a monthly SIP, it will accumulate to around ? 1 crore after 15 years. So the total profit for one and #039 commercial real estate would be around ? 1.95 per ? 1.65 equity funds over the same period. In addition, the investor has a diversified portfolio with the possibility of partial withdrawal through investment funds and one-time withdrawal of real estate. 

Jitendra Solanki said that a lot depends on the choice of the investor, whether he is interested in a diversified portfolio with partial and one-time withdrawals or a simple investment option with maximum liquidity and easy withdrawal and investment. For an investor interested in a diversified portfolio, it is better to invest in commercial real estate using mutual fund SIP rental income, while for those who want to facilitate investment and grow their investment, investing in mutual funds would be a better option, said Solanki. 

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