When you have money that you want to put to good use, you may be tempted by any number of investment options. Two popular options that often come to mind include mutual funds and real estate. But which one truly comes out on top and why? Today, we will explore that.
What About Mutual Funds?
Mutual funds pool money together with other investors. Supplemented with a portfolio, you receive a group of stocks, bonds, or additional securities in exchange for your money.
The value of the portfolio’s assets divided by the amount of shares is what determines the pricing of mutual funds called the NAV, or net asset value. However, know that the investor doesn’t actually own the assets themselves—only the shares.
Also note that each mutual fund investment carries their own goal, portfolio, and risks. Fees can potentially arise and reduce your net returns which might make mutual funds not such a great option for you. There are many claims of top performing mutual funds on the internet. On the flip side, there are investors who made no gains on their principal after twenty, thirty, and even forty years. You can review fund performances at Morningstar. This may be in part the reason for investors moving to other, more lucrative options.
What About Real Estate?
On the other hand, real estate is another way to invest your money. Real estate investing is the process of buying, owning, leasing, or selling properties (land or buildings) for profit.
Real estate usually falls into four distinct categories:
- Residential: homes
- Commercial: businesses
- Industrial: warehouses, factories
- Land: farming, ranches
Investing in real estate can take on many different forms. Maybe you choose to invest in properties directly and rent out units. Maybe you are just looking to diversify your portfolio and would prefer to take a more indirect approach.
No matter your needs or preferences, real estate can accommodate.
Real Estate: The Better Investment Option?
Investing can be a risky business. Obviously, you want to mitigate your risk as much as possible when putting your money out there, but there are no guarantees. Even banks do not give 100% guarantee for money on deposit. Did you know the Canadian Deposit Insurance Corporation coverage is limited to $100,000?
According to a 2015 Savills report, real estate makes up 60% of mainstream global assets worldwide, and that was eight years ago.
There are many benefits of investing in real estate, including:
- Leverage (the borrowing of capital to increase the potential profit) allows you to invest when you cannot buy the property yourself.
- Your investment in real estate provides ways to save on taxes, too. Your profits can be listed as capital gains with lower tax rates, and over time, lower the tax basis with depreciation of your properties. Just be mindful of Recapture.
- Finally, you’ll have more control over your real estate investments than you would with mutual funds. Instead of waiting for a profit of a stock, you are the person in charge of prices, improvements to the property, and other forms of revenue.
Bottom line: real estate comes out on top as an investment option that is always relevant, accessible, and meaningful. While you cannot always predict what a market will look like, you can rest easy knowing that your assets are physical with evident value, unlike mutual funds, which can fluctuate wildly.
ABOUT July Ono.
JulyOno.com is a marketing platform for a real estate investment company. We have been actively involved in the Lower Mainland area real estate investing for a number of years. Our mission is to provide local housing and commercial workspace to quality tenants while at the same time providing an above average return on investment (R.O.I.) for our investor partners and for ourselves. It is truly a win-win-win way of investing!
July offers her investor partners hands-free investment opportunities. If you are interested to learn how to earn an above-average return on your investment, backed by a solid asset, and without the hassle of being a landlord, please contact July Ono.