Which is best investment real estate or mutual fund ?
If you ask me which is best investment real estate or mutual fund, then i would choose the later option. It would be a different story if you are planning to buy home for self use.
Reasons for my choice are listed below.
1.Return on investment: Equity mutual funds provide on a average 12–15% returns in the long term.Real estate is a cyclical sector so time of entry and exit are important. If your time of entry is right then you may fetch returns outdo returns on equity investment, it may also be case where the prices may remain stagnant for years fetching you no returns.
2.Amount of investment: You can start investing with monthly SIP as low as Rs 500. While for real estate investment you will require minimum 15–20% of property value as down-payment and rest in monthly EMI.
3.Liquidity: If you want to redeem your investment in mutual fund, then you will receive your investment in your account within maximum 3 working days after placing your request.
In case of real estate investment,you will have to find a buyer who will pay you right price and after finding one you will have wait through the legal process to get the amount. If you have urgency of funds then you may have sell at lower rate, if you do not find a buyer ready to pay your price.
4.Partial withdrawal: With mutual funds you have option of partial withdrawal of your investments, which is not possible in case of real estate investment.
5.Tax treatment: All returns on investment in equity mutual funds are tax if you stay invested for minimum one year.
In real estate investment if you make any profit from sale then it will be subjected to short term capital gain tax (if property is sold before completion of 3 years) or long term capital gain tax(sold after 3 years).
Kindly note that you stand to lose any tax exemption claimed in previous years if property is sold within five years of purchase. Tax exemption claimed earlier will be added to your income and taxed as per applicable tax slab.
6.Investment charges : In mutual funds there is no entry load on investment, only a exit load may be charged if you redeem your investment before a stipulated time. Mutual funds have a expense ratio of maximum 2.5% , which warranted considering the returns and expertise you get in form of fund manager.
In real estate investment you have to bear home loan interest and charges like registration charge,VAT,maintenance charges.
7.Ease of investment: You can invest in mutual funds with a click of a button from comfort of your home using a mobile or PC.
For real estate investment you have to go through ordeal to find right property, at right price,registration of property, securing financing for the investment and also wait for the developer to give timely possession of property.
If you mutual fund investment is not performing well then you can easily switch from one fund to another, same is not possible in real estate investment.