Real Estate Vs Mutual Funds: Which Is Better For Long-term?

Finding the right investment to invest your hard-earned money into might seem challenging, right? It could be simplified when you know what to pick between Real Estate vs Mutual Funds to find the one that supports your long-term goals.

But, “How do you decide which is the better fit for the long term?”

That is why this analysis explores the potential growth, side-by-side comparison, characteristics, benefits and risks that these two investment types have to offer.

Keep scrolling to learn more.

What is Meant by Mutual Funds?

In simple words, mutual funds in India work like a safety deposit that pools your money together and invests it in a diversified portfolio that experienced fund managers manage.

Mutual Funds are similar to a safety box, much like in earlier times when people used to save money in a barrel of rice. In today's time, that barrel comes with a new name called "Mutual Funds".

But, do you know what the catch is? Well, the only difference is that investing in mutual funds helps you generate profits on the deposited amount and helps investors create generational wealth to make long-term goals achievable.

Likewise, there are two ways by which you can start your mutual fund journey with ease:

SIP (Systematic Investment Plan)
Lumpsum Investment

Both ways give you different choices, like in SIP or a systematic investment plan, you can start investments with a small amount every month, quarterly or yearly in the best mutual funds out there.

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On the contrary, lumpsum investments allow you to invest a large sum of money all at once into the top mutual funds of India without worrying about repeating the same investment next month.

Also Read: What is the Best Date for SIP? Tip for Smart Investors

Pros of Investing in Mutual Funds

Here are the advantages of mutual fund investing:

Fundamentals	Pros of Mutual Funds
Automatic Diversification	Mutual funds invest in a wide range of assets, reducing the risk of any single investment negatively affecting the portfolio.
High Liquidity	You can buy or sell mutual fund units on any business day, often within the same day.
Low Initial Investment	Some mutual funds allow you to start investing with relatively low amounts (as low as Rs.500-Rs.1,000 per month through SIPs).
Expert Management	Fund managers handle the investment decisions, making mutual funds ideal for those without the time or expertise to manage individual investments.
Variety of Options	There are various types of mutual funds (equity, debt, hybrid & index funds) to cater to different risk appetites and investment goals.

Cons of Investing in Mutual Funds

Here are the disadvantages of investing in mutual funds in India:

Fundamentals	Cons of Mutual Funds
Market Volatility	Mutual funds are subject to market fluctuations & equity funds are particularly vulnerable to market volatility.
Management Fees	Fund managers charge a fee for managing the fund, which can impact your returns over time.
Lack of Control	You have no say in how the fund is managed, and its performance depends on the fund manager’s skills and market conditions.
No Physical Asset	Unlike real estate, mutual funds do not provide a tangible asset that you can physically see or use.

Pro Tip: Turn hard work into smart work by using SIP Calculator for free.

What is Real Estate?

Real estate is basically land and anything built on it, like houses, apartments or office buildings. It can also include things like crops, minerals or water on the land. People buy, sell, rent or use real estate for living, working or business purposes.

What are Real Estate Investing Strategies?

Real estate investing strategies are different ways that people can make money from real estate. There are a few main strategies:

Buy and Hold Approach
This means buying a property & holding onto it for a long time, either to rent it out for steady income or wait for the property value to go up.

Flipping Strategy
In this strategy, investors buy a property that needs work, fix it up and sell it quickly for a profit.

Rental Properties
This involves buying property to rent it out to tenants. You earn money through the rent they pay each month.

Real Estate Investment Trusts (REITs)
Instead of buying property directly, you can invest in a company that owns real estate. When the company earns money from its properties, you get a share of the profits.

Wholesaling
This is about finding properties at a lower price, getting them under contract and then selling that contract to someone else for a fee.

Each strategy has its own risks and rewards, so it is important to choose one that fits your goals and level of experience.

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How to Start Investing in Real Estate?

If you’re thinking about getting into real estate investing, there are several ways you can start. Here are a few options:

Buy Property or Land
The most straightforward way to invest in real estate is by buying property, whether it is a house, apartment or land. The goal is to buy it, hold onto it for a while and sell it later when its value has gone up. You can also rent it out for extra income while you own it. This method usually requires a bigger upfront investment but it can pay off well if property prices go up over time.

Invest in REITs (Real Estate Investment Trusts)
If you do not have enough money to buy a property or do not want to deal with managing one, you can invest in REITs. REITs are companies that own and manage commercial real estate like shopping malls or office buildings. When you invest in a REIT, your money goes into a pool with other investors and the REIT uses that money to buy and manage real estate. You earn money from the rent that’s collected and any profits when the properties are sold. This is a great option if you want to invest in real estate without the hassle of owning property.

Invest in Stocks or Mutual Funds
Another way to get into real estate investing is by buying stocks in real estate companies or mutual funds that focus on real estate. These funds invest in companies that develop, manage or finance real estate. While you’re not directly buying property, you are still investing in the real estate market. This method does not require a lot of money to start and is a more hands-off way to get involved in real estate.

Each of these options has its own benefits, so think about what works best for your budget and how much involvement you want.

Risk of Investing in Real Estate

Just like mutual funds, real estate also comes along with a few risk barriers like:

High initial investment
Purchasing property requires a large upfront capital investment, which can be a barrier to entry for many people.

Liquidity Limitations
Unlike stocks and mutual funds, it can take months to sell real estate investments, making it difficult to buy and sell investments.

High Maintenance Cost
Owning property comes with ongoing costs such as maintenance, property taxes and insurance of the property.

Market Volatility
The real estate market can be cyclical and is affected by several factors like economic downturns and changes in interest rates.

It’s about time to learn the defining parameters of real estate vs mutual funds that were used for a comparison.

Real Estate Investments vs Mutual Funds: Key Difference

Here is a short table that highlights the key difference between mutual funds and real estate in the Indian market:

Fundamentals	Mutual Funds	Real Estate
Investment Type	Market-based (Stocks, bonds, equities, etc)	Physical asset (Property)
Liquidity	High (Can be bought and sold easily)	Low (Difficult to sell)
Initial Investment	Low (Start SIP at Rs.100)	High (Needs large capital investment)
Risk	Market risks (Volatility, interest rates)	Market risks + property-specific risks (Location & legal)
Diversification	High (Spreads risk across assets)	Low (Concentrated in one property)

Don’t Miss: Best SIP Plans for 1 Year: Grow Your Money Fast

Did it leave you with real estate investments vs mutual funds, which one to pick? Let’s cover that in the next heading.

Smart Investments, Bigger Returns

Invest ₹3,000/Month Get

20 Lakhs

you Get

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Invest ₹5,000/Month Get

33 Lakhs

you Get

View Plans

Invest ₹10,000/Month Get

67 Lakhs

you Get

View Plans

Real Estate vs Mutual Funds: Which One to Choose?

You can take the help of the table below to decide which investment type suits you best, Real Estate vs Mutual Funds:

Fundamentals	Mutual Funds	Real Estate
Investment Horizon	Mutual funds are best for both long and short-term investors with the best mutual funds to match your duration and goal with one another.	Real estates are best suited for long-term investing, requiring patience to reach a high capital growth and earn sufficient rental income.
Risk Tolerance	Mutual funds do carry short-term volatility, especially equity mutual funds. However, you can diversify your portfolio across different types of mutual funds to minimize risk.	Real estate is less risky but is impacted by the market cycles, interest rates and location-specific factors. If low-risk investment and stability are what you seek, this is an excellent investment type for you.
Capital Requirements	Mutual funds on the other hand, start investment openings at just Rs.100-500, making investments easy and affordable to a large no. of investors.	Real Estates require large starting capital like mortgage and additional costs such as maintenance, taxes and insurance.
Maintenance Effort	In mutual funds, an experienced fund manager oversees your investments, relieving you from the stress of looking after them.	It involves active lookout, from property management to dealing with tenants, repairs and other administrative tasks.
Liquidity	On the other hand, mutual funds are much more liquid. This means you can sell your units and get your money back quickly, usually within 1 to 3 business days.	Real estate is considered an illiquid asset, meaning it's not easy to quickly turn it into cash. Selling a property can take time and sometimes you might not find a buyer willing to pay the price you want.

Top 3 Mutual Funds to Invest in India’s Real Estate Sector

Here are the Top 3 mutual funds to invest in India's real estate sector in 2025:

Scheme Name	Launch Date	AUM (in cr)	3 Yrs Avg Returns
ICICI Prudential Housing Opportunities Fund	18-04-2022	2,429	20.04%
HDFC Housing Opportunities	06-12-2017	1,279	23.84%
Tata Housing Opportunities Fund	02-09-2022	519	23.94% (2Yr)
NIFTY 500 TRI	—	—	19.53%

Final Thoughts

To wrap up, this post gave you a side-by-side comparison to help you choose which one; of the above is a better fit for you.

Now, it is you who needs to decide because real estate needs a bigger upfront investment and selling property can take time. If you are not able to stretch your finances, it might not be the best choice.

On the other hand, mutual funds via SIP (Systematic Investment Plan) are easier to get into with a smaller investment and offer quick access to your money if needed.

Each investment has its pros and cons. Real estate can give you long-term growth & rental income, but it takes more money and effort to manage. Mutual funds are more flexible, with lower costs and less hassle.

Remember, there's no one-size-fits-all answer. It depends on what works best for you.