Real Benefits of Investing in Mutual Funds over Real Estate or Gold

Confused between real estate v/s mutual funds v/s gold? Learn how investing in mutual funds is more beneficial than real estate or gold at IndiaInfoline.

Dec 03, 2017 12:12 IST India Infoline News Service

In today’s time of soaring prices and rising inflation, it has become very difficult to maintain a good lifestyle with a limited source of income. This has made people keen to look for other alternative sources of earnings. While investment seems a lucrative option for an extra income, but again looking at too many available options on the market it is really a tough job to choose the best among them.

Though most of the people tend to earn money out of different investment avenues each of these has their own pros and cons which one must analyze before venturing into it. While at times due to negligence people tend to lose their money or end up with meagre returns.

Thus, simply investing does not help rather a thorough research and analysis before the investment is a must for getting good yields. While we have multiple options in terms of investing such as Mutual funds, Real Estate, Gold etc.

Investing in Mutual funds over Real Estate or Gold

Let us have a look at the comparison between investing in mutual funds over real estate or gold and how investing in Mutual funds is more beneficial in terms of returns over others:
  • Returns beat Inflation:
  1. Mutual Funds: Mutual Funds yields, in general, are able to beat the inflation with their promising nature and performance. All you require to do so is to choose a good portfolio of investment.
  2. Real Estate: Real Estate yields often are not able to beat the inflation significantly as it depends upon the location of the property primarily. The real estate returns being able to beat inflation happens only at selective places and mostly it fails to do so in general.
  3. Gold: Although Gold yields are able to beat the inflation, it is not effective if the time horizon is elongated. So, in long-term Gold yields also fails to beat the inflation effectively.
Thus, Mutual funds yields have more fair chances to beat inflation over an investment in real estate or gold.
  • Diversification of Portfolio:
  1. Mutual Funds: Yes, diversification of the portfolio is possible with investment in different types of securities.
  2. Real Estate: No, diversification of the portfolio is not possible in this type of investment.
  3. Gold: No, diversification of the portfolio is not possible upon investment in Gold.
Diversification of portfolio can happen in Mutual funds investment and thereby dispersing the risk.
  • Taxation on Returns:
  1. Mutual Funds: Mutual funds investment has tax benefits if you remain in the same portfolio over a year.
  2. Real Estate: Yields from Real Estate is taxable after indexation.
  3. Gold: Gold investments have the tax benefit of 3 years for physical gold and 1 year for ETFs (Exchange Traded Funds). But since Gold is very volatile keeping a long-term investment is difficult.
Mutual fund investments enjoy tax benefits over Real Estate investments while although Gold too has tax benefits people don’t tend to keep it for long terms due to its volatility.
  • Liquidity:
  1. Mutual Funds: Mutual funds are liquid.
  2. Real Estate: It takes at least a few weeks to liquidate a Real Estate investment.
  3. Gold: Gold investments are highly liquid.
Mutual Funds and Gold investments are liquid in nature while Real Estate remains difficult to liquidate.
  • Hidden Charges:
  1. Mutual Funds: Mutual Funds don’t have any hidden charges apart from the transaction fees.
  2. Real Estate: Real Estate has several hidden charges such as maintenance of the property, registry and stamping charges etc.
  3. Gold: Gold too, have hidden charges in its maintenance in physical forms such as locker fees and security.
Mutual funds do not have any hidden charges unlike Real Estate and Gold investments.
  • Systematic Investment:
  1. Mutual Funds: Mutual Funds have the option of Systematic investment in the form of SIPs (Systematic Investment Plans).
  2. Real Estate: Real Estate investments have no such provision.
  3. Gold: Gold investments also have no such provision.
Mutual funds have the provision of Systematic Investment unlike Real Estate and Gold Investments.

Conclusion: Above are the benefits of investing in Mutual Funds over Real Estate or Gold. Happy Investing!!!

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