Buying an elite property in a posh area, or piggy banking your money via systematic investment plans? Which one is a better deal? While both seem to be feasible options, it would be wiser to first understand the nature of such financial instruments and then match them with your financial goals.
To endure growth and financial stability in the long term, investment is imperative. Setting aside a proportion of our savings into a financial instrument helps us prepare for future expenses. It can act as a saviour in any unforeseen circumstances. A majority of public deals in some or the other kind of investment mediums. Out of these gold, real estate, mutual funds, and the share market are some of the prime investment modes. However, the real struggle is how to ensure which type of investment is worthy!
Let’s compare the two most popular modes of investments i.e. Real Estate and SIP.
It is important to consider some facts before choosing the medium of investment. Firstly, before investing anywhere one should always consider the purpose behind the investment. Depending upon the reason, the type of investment should be selected. The next vital aspect falling in line is ‘inflation,’ which is certain to rise at its own pace. Hence, one should invest in such a mode that can eventually beat inflation and still fetch good results. This implies that the financial instrument selected for investment should perhaps yield above 6-7% of annual returns.
The above comparison does not infer that real estate investments are a bad choice. It is to be noted that real estate investment has its own merits. Investing in any commercial/residential property is a solid investment asset that provides a high rental income. Also, according to the nature of the property, it may be used for self-consumption as well in the future. In addition to this, property rates have gone skyrocketing in the past decade. Hence, it is wiser to invest in property at a prime location to receive multiple benefits from it. Apart from receiving a regular income in the present, there is a future assurance of having a property in the owner’s name that can either be used or sold out at higher rates.
Therefore, investment choices should be made wisely by considering individual requirements.
If you want to stay in a place for longer than a decade, investing in real estate is an ideal option. Additionally, it will relieve you of the rent payment obligation.
For a three-year period, Equity Linked Savings Scheme is a great investing choice.
In comparison to investments in real estate, mutual fund investments produce larger returns.
Real estate returns can range from 7% to 11% annually, but mutual funds give returns that can range from 14% to 19% annually, depending on the type of investment.
According to the "2% rule," an investment property's monthly rent should be 2% of the purchase price or more.
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