Key Highlights
- Real estate investment carries significant hidden costs and risks that are often underestimated. Rental yields are typically lower than expected after accounting for expenses and taxes.
- Illiquidity, legal complexities, and succession planning add to the challenges of real estate ownership.
- Alternative investment options, such as mutual funds and fixed-income instruments, offer greater liquidity and potentially better returns. Diversification is key to mitigating investment risks.
s real estate truly the best investment, or is it a myth? This two-part blog series dives deep into the realities of property investment, weighing its advantages and disadvantages against alternative options. Part one explores the true cost of property ownership, associated risks, and common misconceptions, setting the stage for a comparison with other investment avenues in part two.
The allure of real estate as a prime investment is strong. Many believe in its potential for appreciation and rental income. However, a closer look reveals a more complex picture. This first part of our series, presented by financial expert Mr. Sridharan, debunks some common myths and explores the key risks associated with real estate and why alternative investment options like fixed-income instruments (offering 7-8% returns), equity-based mutual funds, and hybrid funds may offer greater flexibility and financial security. He also mentions REITs (Real Estate Investment Trusts) and InvITs (Infrastructure Investment Trusts) as indirect ways to participate in real estate while mitigating some risks.
Mr. S. Sridharan is an esteemed financial professional with 15 years of experience as an Independent Financial Advisor (IFA). The Financial Planning Standards Board has honored him with the title of ‘Associate Financial Planner’ in retirement planning and employee benefits. A prolific writer, Sridharan contributes to renowned personal finance magazines like Moneycontrol.com, Financial Express, Times of India, UTI Swatantra, and Nanayam Vikatan.
Key Highlights from the Webinar:
💰 Plan for Future Expenses & Inflation: Calculate your retirement corpus by estimating future expenses with an assumed 6% inflation rate. List your current investments (EPF, PPF, mutual funds) and project their future value to determine any shortfall that needs to be covered through additional savings.
📊 Implement the Bucket Strategy for Stability & Growth:
Divide your savings into four buckets based on when you'll need the funds to balance security and growth while ensuring steady income:
- 1-3 years: Low-risk debt funds or FDs
- 3-6 years: Hybrid funds with 10-15% equity
- 6-10+ years: Balanced equity/debt hybrid funds
- 10+ years: Primarily equity funds for long-term growth
🏥 Prioritize Health & Financial Security: Secure comprehensive health insurance before retirement to avoid financial strain from medical expenses. At the same time, prioritize your retirement savings over other financial commitments to ensure lifelong independence.
🔄 Stay on Track with Regular Reviews & Withdrawals: Periodically review and rebalance your portfolio to align with financial goals and market changes. Use a Systematic Withdrawal Plan (SWP) to generate a steady income stream while preserving capital.
👍 Seek Professional Advice for a Personalized Strategy: Work with a financial advisor to tailor a retirement plan that meets your needs, ensuring a disciplined, long-term approach to wealth creation.
Common Misconceptions:
- Property values aren’t always guaranteed to rise. Market corrections and economic downturns can significantly impact value.
- Assuming there will be high rental yields. Rental income is often lower than anticipated, particularly after accounting for expenses and taxes.
- Managing properties requires time, effort, and expertise. Tenant issues and maintenance can be significant burdens.
Perhaps the most powerful takeaway? Before investing, carefully assess whether property ownership aligns with your financial goals and lifestyle needs. Diversifying into more liquid investments can offer greater flexibility and reduce financial stress. Smart investing isn’t just about returns, it’s about making choices that support long-term security and peace of mind.
This webinar is brought to you by Franklin Templeton. For more such classes on investing, mutual funds, and more, download our app from the Google Play store or connect with our team on WhatsApp.