Rental Income Vs. Equity Mutual Fund Investment

“Your house is not an asset!”– says Robert Kiyosaki in his book “Rich Dad Poor Dad.”

He is one of the many millionaires who made a fortune out of rental income.

And then there is Equity Mutual Fund investment. It has relatively lesser risk, better flexibility, and liquidity.

Head to head, what should you choose?

Of course, your financial position is crucial here. But, there are a few things you must consider before you fixate on one.

Can a property rental income pay for itself?

How has the pandemic triggered work-from-home transition affected the “rental income arena”?

How to choose a residential property for good capital appreciation?

Can it backfire if you invest in properties for rental income?

If you feel lost trying to find an answer, here’s your answer!

Nilesh Shah—veteran fund manager, MD Kotak Mutual—answers your questions in this video below.

Are Mutual Funds Better Than Investing in a Property?

While owning properties can offer substantial returns, it also demands significantly more sweat equity than simply purchasing mutual funds. Real estate investments are not only expensive but also highly illiquid.

Have you ever considered the amount of capital needed to get started in real estate? Even with borrowed cash, the upfront investment is often substantial.

Conversely, mutual funds provide an easier and more flexible entry into the world of investing. So, why not consider the simplicity and accessibility of mutual funds over the complexities of real estate?

Which is Safer, Rental Properties or Stock Investments?

While a well-managed rental property can provide steady returns than the stock market, mutual funds come with far fewer hassles.

For instance, mutual funds won’t disrupt your weekend with a call about a leaking water heater, nor will you need to handle a tenant breaking their lease because of a new job out of state.

Investing in mutual funds allows you to enjoy the rewards of investing without the challenges of property management.

Many people are drawn to real estate investment, but it’s important to weigh the pros and cons carefully.

This article, Real Estate Investment: A Right Choice or Wrong Choice…?, explores the challenges and benefits of investing in real estate to help you decide if it’s the right fit for your financial goals.

Which is Better Mutual Fund or Real Estate?

 Mutual Funds:

• Average Annual Return: Around 12% over the long term (15+ years).
• Liquidity: High; can be liquidated with a single digital click.
• Partial Withdrawal: Possible; can withdraw part of the investment without selling the entire holding.

Real Estate:

• Average Annual Return: Around 8% over the long term.
• Liquidity: Low; liquidating assets can be a lengthy process involving physical steps.
• Partial Withdrawal: Not possible; typically need to sell the entire property to access funds.

Final Insights:

• Return Perspective: Mutual funds generally offer higher returns compared to real estate.
• Liquidity: Mutual funds provide greater ease of liquidity compared to real estate investments.

This makes mutual funds a potentially better option for long-term investors seeking higher returns and easier access to their investments.

If you have any comments or questions, write them in the comment box below.

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