Yesterday I was having some conversations with one of my colleagues. He asked me why I invested in a property rather than mutual funds when I had my cash flow. The discussion happened for a very long time and we both discussed the pros and cons. His questions were not in a way to attack me and say that what I did was right or wrong. But he wanted to do an investment and before that, he tried to understand my thought process.
Finally, the discussion ended with an understanding that both options have their pros and cons and I wanted to cover some of them in this article.
Property Appreciation
One of the biggest reasons why I wanted to purchase a property was because I wanted a place to save my funds and at the same time invest in something that would appreciate over the years. SIP on Mutual funds was also an option available but I still wanted to go for a property purchase because property appreciation is great in our place compared to the market movement. The market has been at its peak in the last few years. But that does not mean that it will continue to be at its best in the coming years too.
I wanted to purchase a good house for me and my future family and the investment was more a mixture of both emotions as well as looking for an appreciation. Every year the land value is getting bigger and bigger and more opportunities are emerging around me. Even though I do not get any return on my investment and I still have not reached my break-even yet, I'm sure that in the coming years my property value will reach a breakeven where even if I sell it as second hand, I should be able to sell it for a little higher price than what I bought it for. Currently if I want to sell my property, I have to sell it for a 20% less price. This will improve in the coming years and that is what I'm expecting from my property investment.
SIP in Mutual funds is not bad either
It all depends on what an individual feels like doing. Many people lack awareness on Mutual fund investments and I have seen the outcome of this investment. I invested a small value in mutual funds about 5 years back and today I'm able to see a huge value there sitting as a silent money and it keeps growing too. In the last 5 years, the money has grown about 5 times my originally invested value. This is one of the strongest reasons why people recommend investing in Mutual funds. Using SIP as an option is to invest frequently and regularly and the money going out of our pockets every month will not be visible much but after a few years it will look like a decent value.
Depending on where the investment happens, properties can also appreciate very well but people still advise going for Mutual funds because it is a nice alternative that beats the inflation very well. Stock investment is also good but for that wee have to know the right stock to investment and sometimes it can also backfire as it is hard for us to stay up to date with the market. When it comes to Mutual funds, there will be someone else doing the market buy-and-sell game. We have to just be a part of it with our money and reap the profits. Real estate can have a problem where sometimes it can go up drastically and sometimes it can go down too.
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