Shedding light on both the options, Dhirendra Kumar says one should take the decision based on one's own circumstances.
14-Aug-2020
Should I invest in a property that can generate 4 per cent returns through rental income, apart from the appreciation in property value or create a mutual fund portfolio of the similar value and withdraw 5-6 per cent yearly?
- Akhil Raj
There are issues related to earning from the property. One is that you have to keep taking care of it. You have to look for a tenant. And there is a possibility that the rental yields could be much lower than even 4 per cent. If you get 4-5 per cent today, it may be a decent yield. So, it depends. Besides, you need to have diversification and consider convenience as a factor. Buying a property is a big-ticket thing, whereas you can build your mutual fund portfolio gradually over time. The latter would be liquid most of the time and if you are able to hold it for five-10 years, it will be a completely different story with appreciation.
So, I would say that it entirely depends. If you come across an opportunity where there will be 5-6 per cent rental yield on a property, you also think that it will appreciate nicely in the future and you don't have much of a problem taking care of it, then the property could be a potential choice. And if you already own a property, then you don't really have much of a choice. Otherwise, owning a property has its set of overheads, whereas a mutual fund portfolio can provide you with much convenience.
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