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Real estate and mutual funds both have their own advantages. Real estate market may give humongous returns but it fluctuates a lot

Written by Adhil Shetty | Published: April 1, 2013 10:07:08 pm

I am a pensionable government employee. I have a home loan which I am about to pay off. My daughter wants to be a doctor and son wants to be an engineer. Obviously I need money for their education and marriage. Will it be good for me to go for a second house for investment or put a sizable amount of my savings in equity mutual funds and balanced funds for better return?  

—Udaybhanu Choudhury

Real estate and mutual funds both have their own advantages. Real estate market may give humongous returns but it fluctuates a lot. Real estate market often moves in very long cycles. We had the real estate boom in 2008 and now the market looks subdued. At your age and liabilities,I would like to be doubly sure before I invest money there.

Mutual Funds,on the other hand,are a better and safer choice. You should invest in balanced and debt mutual funds. Equity fund is risky as of now because the economy is in bad shape. You should go for pure debt fund in current scenario. Once the economy improves,you may swap your money to balanced fund. Some of the funds which have given good returns are HDFC Balanced Fund,Birla Sunlife Government Securities,HDFC Short-Term Opportunities and Birla Sunlife Medium Term Funds.

I am 28 years old and my monthly income is Rs 60,000. Which Mutual Fund should I invest in,if I want a return of Rs 1 crore after 10 years?

—Saroj K

You have not mentioned the net amount you can invest every month after meeting all your expenses. If you can spare Rs 38,500 pm for Mutual Fund SIP and expect a moderate return of 15 per cent pa,the final amount after 10 years will be Rs 1,01,26,200. When you choose a Mutual Fund,it is important to study their past returns to help you figure out how they are likely to fare in the medium term. Try and invest in different asset classes to maintain good rate of return and diversify the risk.

You could also try the following options:

1. Direct investment in equities with good stock selection could be another option if your monthly investment is lower than discussed above,but please analyse your risk profile before direct stock investment.

2. Take a leverage on your fund with the help of housing loan and invest in property for good return in the medium to long term.

— Expert advice by Adhil Shetty,CEO,

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