dear viewers welcome to yet another episode of your life your money when it comes to question of mutual funds or when it comes to question of real estate both the opportunities are very attractive and people want to invest in mutual funds as well as the real estate in this episode I'm going to compare mutual funds versus Real Estate and help you take a informed Deion around where should you invest whether it is mutual funds or whether it is real estate how should you approach mutual fund or how should you approach your invest into real estate
I'm going to discuss a lot of finer points around this and help you take a rational Deion on where should you invest stay till the end of the videos every point that I have discussed here is equally important this is NRI money clinic for you and I am Dr chra KH but your financial guide for a happy [Music] living NRI money Clinic no hype just the right advice [Music] dear viewers let us look at mutual fund in comparison with real estate or real estate in comparison with mutual fund let us evaluate these two investment opportunities
under various parameters the first parameter that I'm going to take it up is the return potential how much can I make money out of investing in mutual fund how much can I make money by investing in real estate interestingly both are great investment opportunities both opport opportunities are equally potential in generating return both will generate return by beating inflation so when you compare the kind of potential that you have to get a good rate of return both will score the same now let us look at the taxation of mutual funds versus the real estate if
you hold it for a longer period of time both will come under long-term capital gains tax the long-term capital gains tax is same for both mutual funds as well as the real estate when I say about mutual funds I'm talking here about the equity mutual funds I'm not considering the debt mutual fund so I'm comparing the taxation of equity mutual fund versus investment into the real estate so taxation is same for both when you invest into mutual funds or a real estate let's look at the holding period a mutual fund can be invested for shortterm
it can be invested for medium-term and it can be invested for long term there is no set period there you think a bull market is evolv I will bring in some money I will exit once the bull market gets over you can do that that opportunity is available for you however when it comes to question of real estate the only possibility is a long-term investment you can't invest money into the real estate and say I will sell it in 6 months 1 year 2 year no real estate gives you good return only when you hold
it for longterm that to really longterm 10 15 20 years period of time that is where where you make killer money in case of real estate so real estate only a long-term investor can invest into it however mutual funds can be invested irrespective of your holding period but of course you have to create portfolios according to your holding duration now let us look at how much of money do we need to invest in mutual funds and real estate to invest in mutual fund you can invest with any amount of money that you have it could
be as little as 500 it could be as big as the amount of money that you have however when comes to question of real estate what you need is a big chunk of money tens of lacks of rupees many times multiples of crores also is required to invest in real estate so real estate is not for somebody who doesn't have the required amount of money so you can do real estate only with a large chunk of money however mutual fund can be done with any amount of money that you have how can you fund your
purchases in mutual funds and real estate no bank is going to give you loan to buy the mutual funds so you have to buy mutual fund with your own funds however a real estate has a collateral value so a bank can fund you for buying a real estate so normally most of the time you can say generally 90% and above cases of real estate buying happens with borrowed money so you need somebody else to lend you money and you pay interest that's how you buy the real estate let's look at the liquidity if I need
money how can I get this money in case of mutual fund you can liquidate on a day five days in a week whenever the days the markets are open you can just Square Off Your Position sell it and you can get the money immediate no questions asked however when it comes to question of real estate it is an illiquid asset you may have to wait for a buyer to come forward you have to wait for proper rates to reflect before you can take a Deion to sell it off so liquidity is highly constricted when it
comes to question of real estate in case of mutual fund there is a liquidity every day in the market let's look at another important aspect here the price realization how much money I get when I sell a mutual fund versus if I sell the real estate in case of mutual fund there is a daily valuation the ns are there and it is in public domain stock market reflected and at that price the buying and selling happen so you know exactly how much money you get when you sell a mutual fund however in case of real
estate you do not know how how much money you are going to get you should wait for Price Discovery mechanism so Market may say that you'll get 10,000 rupes per square fet but that's something what people are quoting but when you try to sell you may not get a buyer for that particular value somebody may ask it for a discount there may not be a buyer at all you could be in a situation of distress so you may have to sell it for a lesser value than What markets are quoted over there so you have
to go through a price Discovery mechanism so don't get a comfor that your property is quoting so much of a value the exact price what you get is known only when you sell it that's the biggest drawback of real estate let's also look at the incidental cost of selling your assets in case of mutual fund the incidental cost of selling the mutual fund is negligible or nil because you sell it at the market price and you get that price however in case of real estate when you try to sell there are many costs which are
involved in it you may have to pay the broker commission you may have to pay the taxes along with that there could be invisible cost which may come along with it there are many costs of selling a real estate now let's look at another parameter the divisibility you have Assets in mutual fund and you have a real estate portfolio let us say that you need a small amount of money let's say that you have got 2 crores in mutual fund and you have got 2 crores worth of real estate now your cash needs could be
as little as 50,000 Rupees you can sell only 50,000 Rupees worth of mutual funds and you can get that cash you don't have to liquidate your entire 2 CR portfolio but what happens in case of real estate if you need the money you don't have divisibility you can't sell the staircase you can't sell the steps you can't sell the bathroom you can't sell the windows you have to sell it as a package so there is no divisibility you can't get money in bits and pieces that's another drawback of real estate let's say that I don't
want to sell the unit can I realize money in some other way for example pledging of asset ass can I pledge these assets you can pledge both your mutual fund assets and get a loan against that at the same time collateralizing a real estate is also a very popular medium you can give a your real estate as a collateral and generate money so both mutual fund assets as well as your real estate portfolio can be collateralized or pled to a bank and you can realize some amount of money if you want to what about the
maintenance cost of these assets to maintain a mutual fund asset you have zero cost you don't need to pay any taxation you don't need to pay any maintenance cost nothing of the sort of course the expense ratios are there but that is all inbuilt into it but there is no external cost other than this however in case of real estate you may have to have multiple types of cost of Maintenance you may have to pay for the security you may have to pay in the building you may have to carry out the repairs you may
have to P for the Brokers you could have multiple costs of maintaining the real estate so this is one another downside of real estate it takes a lot of your energies and mental space and your attention to maintain your real estate however a mutual fund does not have this disadvantage what is the hazard in buying these Assets in case of Mutual Fund mutual fund the level of Hazard is limited I won't say that there is no hazard in buying the mutual fund these days you see the way the fintech companies are advertising people will come
they will look at the Google rating of different fun funds small caps midcaps the micro caps they are hazardous if you do not exercise caution or if you do not have professional advice with you however compared to the real estate the hazard level in investing in mutual fund looks much lesser in case of real estate if you're not cautious or if you are Reckless real estate can literally kill your financial life I have met with lots of people who recklessly buy the properties get into problem they're forced to sell these assets at a discount price
and they incur huge amount of losses when you buy real estate you should do much more due diligence you should check your cash flow you should ask what can go wrong if something goes wrong what are the Alternatives in front of it unless you exercise all these cautions make no mistake however attractive the real estate could be and in lives of so many people it has a potential to kill your financial life is it really essential for you to invest in mutual fund or real estate what is the level of need as a planner I
would say to have mutual fund is a must in your portfolio to have real estate is also equally a must in your portfolio both score at the same level when it comes to question of need nobody can say that I don't need mutual fund nobody can say that I don't need real estate both are absolutely essential in your portfolio there are two different asset classes they behave differently as I check through different parameters till now however from a need perspective both are a must have in your portfolio if both are essential in your portfolio how
to go about it the best way is you buy mutual fund like the way you buy real estate and you buy real estate like the way you buy mutual fund I will explain here for example when you buy a real estate you take a loan you pay an Emi that means for property purchase you pay small small amounts of money every month over so many years you pay for it and then the asset becomes your own let's reverse it instead of that how do you like setting aside small amounts of money instead of taking a
loan growing that money and at a later point of time you buy into realistic likewise when you buy a mutual fund people buy mutual fund for short term nobody has the patience to hold the mutual fund schemes for longer periods of time if the data is to be believed most of the investors 90% of the investors sell off their funds in less than 3 years so you buy mutual fund like the way you buy real estate you don't buy real estate for 1 year 2 years three you buy them for long years many years of
holding period your mutual fund buying should also be like a real estate buy it like a real estate don't sell it for less than 10 years then only they work in your advantage and they give you the kind of returns what everybody is advertising for in the short run anything can happen in the mutual fund so the simple answer is buy mutual fund like the way you do for Real Estate from a holding period perspective and buy real estate like the way you do mutual fund meaning you set a aside small small amount of money
in the mutual fund portfolio grow it into a big amount of money and when you have the sufficient amount of money that is the time you buy the real estate what is the advantage of maintaining this discipline or this methodology number one to buy your real estate you don't need to take a loan there you may argue that instead of buying the real estate today I will buy the real estate 10 years later the prices will be higher I agree but the investment that you have made in mutual fund will also grow and compens said
for that price rise that is happening in the real estate plus it will de-stress you if you have taken a loan it plays on your mind it plays on your cash flow if you were to have a job loss then you will have problem on your hand however if you are doing through an sip route building this fund the goal here is to buy the real estate at some point of time in future it will not stress you you can manage the show as it comes let any kind of a situation come in your life
you're not worried about it when you buy a property taking a loan you don't compute your return based on the property price that you have paid to buy that property you should include the property Price Plus the interest that you have paid over the years that will give you the true purchase rate of that property when you do through the reverse route that is you invested in sip systematic investment route put it there your purchase cost Remains the Same the rest of the money is the gains that you have made that will help you to
buy the property at a later point of time now let us look at what is the advantage AG of buying a property 15 years later or 10 years later when you buy a property 15 years later than buying it today if you were to use it 15 years later for your own use you will get a brand new property 15 years later you don't have to worry too much about maintaining this property because it's a brand new likewise when you buy you'll get a contemporary property there will be lot of advancement in Building Technology the
type of material use the type of technology which comes in which one would you like to go and enter into a old property or a new property by investing your money in mutual fund today setting the life goal as buying the property growing this money and buying at a later point of time works in favor of you likewise 15 years later or 10 years later you are much more mature person than what you are today you have gone through the life experiences you know what works what doesn't work your life dislike there is more clarity
which will emerge and you will be taking a more rational decision so if you want to buy a real estate the best advice is postpone it do it at a future point of time however allocate the required amount of money put it into a mutual fund portfolio under professional guidance grow that money and when the day comes close the mutual fund buy that property that looks to be the more suitable equation in my personal opinion there is one more way of buying real estate these days we have done countless videos on this subject called fractional
commercial real estate last year alone a lot of our clients have invested the money into fractional commercial real estate very attractive investment opportunity it pays out a rent of 8 to 9% there is a capital appreciation of 5% you don't need a large chunk of money you can invest into fractional commercial real estate with as little as 25 to 30 lakhs one area of concern which remained with fractional commercial real estate is that it was not regulated even that problem has been resolved now now sebi is regulating fractional commercial real estate business and people can
invest into fractional commercial real estate with a lot of relief even though at this point of time the minimum investment into fractional commercial real estate remains at 25 lakhs or so in my opinion probably as days months and years pass the threshold of 25 lakhs may come down and people may be able to invest in fractional commercial real estate with much lesser value than what it is available today by the way if any of you are interested to invest in mutual funds in India or fractional commercial real estate in India you can make best use
of services provided by Anri money Clinic we have team of experts to help you build your mutual fund portfolios to identify the right properties in fractional commercial real estate if you have an interest all that you have to do is reach out to us through a WhatsApp message on the number that is given in the description box below to make it easier we have provided a link also to or Whatsapp click on the link it takes you to the WhatsApp send us an exploratory message one of our team members from nrm clinic will get in
touch with you help you do whatever that you need either in mutual fund or through the fractional commercial real estate why delay send that message now dear viewers hope the video that I've done today helped you to understand the intricacies of investing in mutual fund versus investing in real estate hope this video helps you to take meaningful Deion a rational Deion and you will get benefited from the points that I've discussed in this video by the way do not forget to give me a thumbs up if you like the content of this video don't forget
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