Investing is a crucial component of building long-term wealth, and individuals have a plethora of investment options to choose from. Two of the most popular investment options are real estate and mutual funds. While both offer the potential for long-term returns, they differ in terms of investment strategy, risk, and potential returns. Here are a few examples of the benefits of investing in real estate over mutual funds.
Stable and Predictable Income Stream - One of the main advantages of real estate is its ability to provide better returns than the stock market without as much volatility. While the stock market can be unpredictable and subject to short-term fluctuations, real estate offers a stable and predictable income stream. This is because real estate is a tangible asset that provides a steady stream of rental income.
Prudent Mix of Assets for Investment - It can vary in the range of 40% to 50% which itself is a good reason to focus on real estate investments. In addition to this, if someone is interested in a diversified portfolio, investing the rental income received from commercial investment in mutual funds SIP can help us fetch more returns.
Lower Tax Rate - Real estate investment also offers a lower tax rate compared to other investments. The Indian government provides various tax benefits to encourage investment in real estate. For example, deductions on the interest paid on home loans can be availed under Section 24 of the Income Tax Act. Additionally, tax benefits can also be claimed on the principal amount of the home loan under Section 80C of the Income Tax Act, besides these various sections of the Income Tax Act such as Section 54, and Section 112 provides varied nature of exemptions/deductions/ indexation benefits.
High Tangible Asset Value - Moreover, real estate investment provides a high tangible asset value which means that the value of your investment is based on the physical property rather than just paper assets. As compared to mutual funds, which are just paper assets, real estate offers a physical asset that can provide you with a sense of security and a hedge against inflation.
Predictable Cash Flow - In addition, real estate investment has a predictable cash flow. With rental properties, you have a reliable source of income that you can depend on each month. This is because rental properties provide a steady and predictable cash flow, allowing you to plan your finances accordingly.
Long-Term Investment and Market Risks - When it comes to investing in mutual funds, it's important to understand that it typically requires a longer period of investment to generate good returns. Unlike real estate, which can often appreciate relatively quickly, mutual funds require a more patient approach. Furthermore, investors in mutual funds need to be prepared to deal with market risks and fluctuations, which can result in sudden and significant losses in a matter of days or even hours.
Investment Options - When it comes to investing in real estate, there are various options available. Investing in REITs (Real Estate Investment Trusts) is one of the most popular options. REITs are companies that own commercial real estate properties like office buildings, retail spaces, apartments, and hotels. They tend to pay high dividends, making them a preferred investment for retirement.
Why Real Estate over Mutual Funds
In conclusion, both real estate and mutual funds offer opportunities for investors to gain high returns over time. However, real estate has several advantages over mutual funds such as a high tangible asset value, lower tax rate, and predictable cash flow. Investing in real estate also allows you to protect yourself and your wealth in the long term. With India's booming real estate market, now is a great time to consider it. So, if you're looking to invest your money in a reliable and stable asset, real estate investment is the way to go.
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