Generally people don't book profit in real-estate because of following reasons-
1. Rate of their property doesn't get published daily. Therefore they can always live in hope that their property rate is going up. 2. It's their decision not advised by someone. Therefore, the hope always remains very strong. 3. Real-estate is tangible. They can show it to people. Adds snob value. 4. It's illiquid, Can't be sold easily. But this point gets ignored. 5. Mind is conditioned as, investment in real estate is for long term only (10 -15 years or even more).
Few things people ignore in real estate investment: 1. They do not add interest amount to the cost of property, e.g people say I bought the property for a crore but won't add 50-70 lakhs paid as interest into cost. And most importantly, registration charges (almost 7% of property value) 2. Maintenance cost, society maintenance and maintenance such as painting, repair etc. 3. Hassle of finding a good tenant and days of non occupancy i.e. months when property is without tenant and remain empty. 4. Can't be equally divided between kids, if there is more than one property because two properties will not have same market value. 5. Most important is taxation part.
Now , when people invest in Equity Mutual Fund what they do expect. 1. Expect appreciation from the day they invest, if it goes down then they think it as Risky. 2. Check valuations every now and then. Feel uncomfortable if don’t see valuation. 3. If appreciation doesn’t happen for a certain period, then they think it’s of no use. 4. Expect Appreciation to happen linearly, MUST. 5. The moment they see good profits, want to exit. Long term commitment goes for a toss.
Last Few Words- The way people do not book profit at every 3-4 years in real estate by selling a portion of plot or apartment? Then why don’t show the same temperament with equity mutual funds. Allow your equity Investment to grow. Equity is also for long term the way Real Estate is, with more efficiency.
Conclusion:In these tough times, it is easy to be influenced by different people. It is utmost essential to act rationally and think through our impending decision before taking any action. It is better to avoid doing things that you may later regret. These were the four mistakes that mutual fund investors are prone to do in the current scenario. You can consult your financial advisor to avoid mistakes and make the right investment decisions.
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