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Benefits Of Investing In Mutual Funds Over Gold Or Real Estate Research Team | Posted On Wednesday, January 24,2018, 07:11 PM

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Benefits Of Investing In Mutual Funds Over Gold Or Real Estate



A mutual fund is an investment vehicle that pools investors money and invests them in securities like bonds, stocks, short-term money market instruments and commodities. It is the best investment for investors who do not have much knowledge and time to invest in the stock market.

Investing in mutual funds, helps investors meet financial goals and grow their money over the long-term. After demonetization, many households shifted from traditional investments like FD, gold and real estate to mutual funds.

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Benefits Of Investing In Mutual Funds Over Gold Or Real Estate

These are some of the benefits of investing in mutual funds over real estate or gold.

1. Inflation-beating returns

The main intention of investing money is to beat inflation. As prices of our day to day needs increase due to inflation, the investments which you make should be able to generate returns above inflation. Mutual funds are a better hedge against inflation compared to real estate and gold.

All you need to do is choose a good portfolio. Returns you get from real estate are often not able to beat inflation, as returns depends mainly on location of the property. Real estate returns can beat inflation only on select property. Even though returns you get from gold are able to beat inflation, they may not do so over a long period of time.


2. The Diversification benefit

Putting all eggs in a single basket is not a good idea. You should always diversify your portfolio to avoid unnecessary risks. Investment in mutual funds helps you diversify your portfolio as it invests across sectors.

You can diversify a real estate investment to a certain extent by investing in residential and commercial properties. As the ticket size of the investment is very high, diversification is quite difficult. No diversification is possible in a gold investment.

3. You get Taxation Benefit

Equity Mutual fund investments offers you tax benefits if you stay invested for over a year. Dividends you get are tax-free. LTCG on Real estate is taxable with the indexation benefit. Short-term capital gains from gold are added to your taxable income and taxed according to the tax slab you fall under.

4. Invest in mutual funds via SIPs

You can invest a small amount of money every month/quarter in mutual funds through SIPs to build a huge corpus over a long period of time. The systematic investment plan in equity mutual funds also provides a great way to average rupee costs. An investment in gold and real estate does not offer this benefit.

SEE ALSO: SIP For Retired People

5. Mutual Funds have high liquidity

Mutual funds are a highly liquid investment. Equity mutual funds take a couple of days to process withdrawals. You can withdraw money instantly from some liquid mutual funds. Real estate is not as liquid as mutual funds. It takes few days/months to find a seller and liquidate the real estate investment. Then, you might not get the ideal price.

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See Also: How to make your first mutual fund investment

6. Hidden Charges in Mutual Funds

Mutual funds don't have any hidden charges. There is no entry load and if you stay invested for more than 6 months, exit load will not be charged on most mutual funds. Real Estate has a lot of hidden charges.  Hidden charges include registration costs, lawyer's fees, property tax, maintenance and so on. Gold too has hidden charges. If you hold physical gold, you will have to spend on locker fees for its security. Be Wise, Get Rich.

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