Mutual funds vs real estate: Every investor must factor in the aspect of liquidity of the investment instrument

When it comes to investment, people have to consider various factors before parking their money in any form of investment. While shortlisting the options for investment, you come across many instruments such as stocks, mutual funds (MFs), gold, fixed deposits (FD) and real estate among others. If we talk about the long-term perspective, some people prefer MFs while others might wish to invest in real estate. Here is a comparative analysis of real estate and mutual funds as investment instruments.
“While all the investment instruments have their pros and cons, factors such as return potential, consistency, security, and budget range must govern your decision. Despite the short term challenges due to the pandemic, real estate is still considered almost similar to a fixed deposit. On the other hand, a mutual fund investment is way riskier,” said Shubham Arora, Director, Sheerbulls India Pvt Ltd.

Every investor must factor in the aspect of liquidity of the investment instrument.

Atul Goel, MD, Goel Ganga Group & President (Elect.), NAREDCO Pune said that both Mutual funds and real estate starkly different in terms of liquidity. Although it seems that Mutual funds are more liquid, the risk quotient and the market exposure make liquidity a challenge.

“However, such is not the case with the property assets. It might take a few months to get a customer and seal the deal, but the value remains intact, and the money cannot vanish overnight, unlike mutual funds,” said Atul Goel.

However, it must be noted that people have to sacrifice a fair share of money in brokerage. Investors must also beware of panic selling as it reduces the value of the asset, he added.

The general perception has been that an investment in real estate remains a consistent performer over the years.

“Barring a few periods of slowdown, property prices across the cities have skyrocketed. Although the consistency is very much dependent on the factors such as connectivity, physical infrastructure, social amenities, road network, neighbourhoods, planned projects, it is viewed as more secure than an unpredictable Mutual Fund/Equity market,” said Suren Goyal, Partner, RPS Group.

Real estate industry experts believe that from a long term perspective, real estate and property investments are still preferred and will continue to be favoured by the investors.

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