Tags: Wealth Management, Investment Lesson, Mutual Funds, Mutual Fund Basics, Stock market, Budget, Finance, Investing, Personal Finance, Investment, ETFs, SIP, Multi cap
Various investment avenues can be grouped in various categories, called asset classes. An asset class is a grouping of investments that exhibit similar characteristics. There are four broad asset categories or asset classes, and then there are various subcategories, within each of these. The four broad categories—Real estate, Commodities, Equity and Fixed income.
Real estate is considered as the most important and popular among all the asset classes. However, the popularity of this asset category is large because of a reason not related to investment. For those who have bought their own houses, it is the largest expense in life. The word used here is “expense”, and not “investment”. This would be elaborated later, but it is pertinent to mention here that in majority of cases, individuals purchase real estate for self- occupation. This should not be considered as an investment, since selling the same may have a negative impact on one’s lifestyle.
Real estate could be further classified into various categories, viz., residential real estate, land, commercial real estate, etc.
As an asset category, real estate exhibits certain traits, some of which are listed as under:
Location is the most important factor impacting the performance of an investment in real estate
Real estate is illiquid
It is not a divisible asset
One can invest in physical real estate, as well as in the financial form
Apart from capital appreciation, it can also generate current income in form of rents
In case of real estate, the transaction costs, e.g., brokerage charges, registration charges, etc. are quite high. This would bring down the return on investment.
The cost of maintenance of the property, as well as any taxes payable must be adjusted before calculating the return on investment, something that many individual investors do not. These expenses are also quite high, and cannot be ignored.
The investments acquired or sold shall be accounted at transaction price excluding all transaction costs such as brokerage, stamp charges and any charge customarily included in the broker’s contract note that are attributable to acquisition/sale of investments.
Disclaimer:
The information set out above is included for general information purposes only and is not exhaustive and does not constitute legal or tax advice. All complaints regarding Mutual Fund can be directed towards visit www.scores.gov.in (SEBI SCORES portal). Readers are requested to make informed investment decisions and consult Chaitanya Financial Consultants – 9000628943 / mfd.mmr@gmail.com to determine the financial implications with respect to investing in Mutual Funds.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
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