Ujjawal Pahwa Reveals Why SWP in Mutual Funds Could Be a Better Option Than Real Estate

Many people make investments in real estate to generate passive income, usually through rental properties. According to finance expert Ujjawal Pahwa, real estate investments have a few negative aspects. Although it is a good investment option, sometimes these challenges make other investment options more attractive.

Drawbacks of Real Estate Investment:

• Residential rental yields are 2-3%.
• Real estate is growing at only 6% in urban areas.
• Tenant search is problematic.
• Maintenance of a house requires too much time, effort, and money.
• Real estate does not offer diversification.
• Liquidity is a problem. It may take 3-8 months to cash in on a property.

Why Consider a Systematic Withdrawal Plan (SWP)?

Under SWP, if you invest a lump sum in a mutual fund, you can specify how much you will withdraw on a regular basis and at what frequency, resulting in passive income.

Comparing Real Estate and Mutual Funds with SWP

Advantages of Mutual Funds and SWP:

• SWP allows you to set your own withdrawal amount. Make sure it does not exceed 8% of your investment.

• Mutual funds offer diversification, while real estate does not.
• Mutual fund growth is higher.
• There is no worry about maintenance and tenant search. Only a one-time job to invest and sit back.

Disadvantages of SWP:

• Withdrawal from mutual funds will be taxed. Although rents are taxed, they are also eligible for a 30% deduction.
• During market turbulence or correction, you might have to stop the withdrawal.
• With properties, you can park your black money.

View this post on Instagram

A post shared by Ujjawal Pahwa | Finance (@cs.ujjawalpahwa)

In conclusion, mutual funds with SWP offer a more flexible, diversified, and potentially higher return investment than real estate. However, each option depends on your financial goals and risk appetite.