The Three Reasons Why the Experts Recommend Real Estate Investments over Mutual Funds

July 04, 2014
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Canadians across the country are looking for ways in which to make their finances work for them so that they have more disposable income in the future. There is a tremendous amount of information online concerning the various investment options available to those with disposable funds to enter the marketplace. But how do you know who to trust? In this article we’ll examine the major benefits of investing your hard-earned dollars into the real estate market in comparison with investing in mutual funds which are recommended by financial institutions.

Complexity

The sheer complexity of mutual fund investments, where numbers rise and fall based on complex mathematical equations can make the investment a daunting prospect.  Even many of the leading experts on the stock market have only a limited understanding how the stock market will react from one week to the next. Real estate figures however are based on hard data, making the returns more predictable for the risk-averse investor.

Tangible Assets

Herein lays one of the most important advantages to investing in real estate over the stock market.  When investors place their wealth into a property, they can then use this fixed asset to leverage their buying power in the future to purchase more properties.

Having this tangible asset within their portfolio makes the investor a safer bet for lending institutions and therefore puts the investor in a better position against those that hold mutual fund investments within their portfolio. Because mutual funds are a paper-based product that could change in value quickly, those with a risk-averse strategy are more likely to choose real estate investing given forthright advice by professional investment specialists.

Real estate is fantastic because it’s secured money into tangible assets. It’s a hedge against inflation; it’s great for tax reasons. It’s also proven to be largely immune to the type of short-term market volatility that we’ve seen in recent years.” – Mark Turcotte, Sutton Incentive Realty

Performance

Of course, the major number that all investors look towards when analyzing a potential investment is annual performance. One of the great benefits to investing in real estate, specifically in vehicles such as Limited Partnerships, is that the ROI for such investments is unlimited while the risk is limited to the initial investment alone.

The Canadian real estate market has shown tremendous stability in recent years, even compared with the relative stability of the nation’s stock market. Canadian population hubs such as Toronto, Hamilton and Vancouver are still seeing tremendous growth in property values in recent years and investors are reaping the benefits.

Those that stay the course with real estate investments have historically reaped the rewards in the longer term. For example, in a press release from the Bank of Canada in 2011, the institution noted that:

The value of residential real estate holdings in Canada has climbed more than 250 per cent in the past 20 years, vastly outpacing increases in consumer prices and disposable income over that period.”

The figures truly do speak for themselves. But when outlined like this by a major Canadian institution, investors can see the benefits of making real estate a key part of their long-term investment strategy.

A practical investment option for the long-term investor

With thousands still suffering the effects of the stock market collapse in North America, the opportunity to analyze historical data from the various investment markets arises.

Proactive investors that take the time to review the figures available will see the advantages provided to them by real estate investment over the other alternatives.