Everyone wants to increase their wealth; however, it can take some time to figure out how to make that happen. Many look to mutual funds and real estate for investment opportunities. Perhaps they know somebody who has seen success from one of these methods.
Still, the question remains: which of these investments is the better option? The first step to answering this question is to understand what each option entails:
Mutual Funds vs Real Estate
To put it simply, a mutual fund is a hodgepodge of investments pooled together by many different people. Mutual funds may include stocks, bonds, and various other types of assets. Professional money managers oversee these funds. As such, they make the calls on what to do with the money to see that multiplies with time. While some investors may prefer this hands-off approach to investing, it has some disadvantages. Perhaps most notably, there are quite a few middlemen in the process.
Real estate investments are a little more straight-forward. Real estate investments involve purchasing property for profit. This often involves renting the property out to tenants, which results in the collection of revenue from rent. The increase of the real estate’s value over time can also provide revenue. Unless an investor chooses to hire a rental property manager, the sole responsibility of the real estate lies upon the investor. This increased responsibility calls for a more hands-on approach, but results in more control over the investment and involves less risk.
JD Esajian, president of CT Homes LLC and national speaker with FortuneBuilders Inc., explains that “real estate continues to be one of the most popular investment strategies for protecting and growing one’s wealth. Combined with the enticement of generating cash flow, investing in real estate also opens a treasure chest of tax advantages.”
Some tax advantages include:
- Deductions
- Passive Income & Pass-Through Deductions
- Capital Gains
- Capital gains are the profits homeowners make when they sell their real estate property.
- Holding property for more than one year before selling is the most beneficial option presented to an investor, as it calls for a lower tax rate to be paid by the investor
- Capital gains are the profits homeowners make when they sell their real estate property.
- Depreciation
- 1031 Exchange
- Tax-Deferred Retirement Accounts
- Self-Employment/FICA Tax
- Opportunity Zones
Mutual funds do not offer these same tax benefits. In fact, mutual funds face many challenges that real estate investments do not. Some cons presented by mutual funds are:
- High fees
- Tax inefficiency
- Poor trade execution
- Potential for management abuses
Why Real Estate Comes Out on Top
Real estate offers more control over the investment, whereas mutual funds rely on complete trust in the money manager. It also has the potential to bring in more revenue than mutual funds thanks to tax benefits that mutual funds do not share. The obvious conclusion is that real estate investments are a much better option than that of mutual funds.
ABOUT RICHARD BRISSON
RichardBrisson.ca is a real estate investment company.We have been actively involved in Barrie, Ontario and surrounding area with our real estate investing. Our mission is to provide quality housing for quality tenants, while at the same time providing an above average return on investment (R.O.I) for our investor partners and ourselves. It is truly a win-win-win way of investing!
Richard offers his 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 Richard.
For more information about Richard and his investment program, you may call (705) 321-2148 or email him at invest@richardbrisson.ca or visit https://richardbrisson.ca/.
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