Many people ponder over how to invest their money. A common question is whether to put money in Money Market Funds (MMFs) or Real Estate. You can use the parameters below to compare these investment vehicles to decide which direction to take.
- Goal
Defining goals is a crucial step in making beneficial decisions. The framework goes beyond the financial world. You can use many methods, including the SMART (Specific, Measurable, Attainable, Realistic, Time-Bound) principle, to build frameworks for goal setting.
Determining your goal helps you create a clear vision. You are more likely to achieve your objective with clarity. For example, your desire could be to beat the inflation rate.
- Where You Are On Your Financial Journey
At Debt Free Living 254, we believe that the stage of your financial journey plays a role in determining the kind of investments to make. For example, you should avoid investing in illiquid vehicles when you do not have an emergency fund.
Easy access is a crucial feature of emergency funds vehicles. The goal here is more of keeping inflation away than making a profit. Some people have had to sell their assets at throw-away prices during emergencies due to a lack of liquidity.
- Returns
Returns in the investment world mean the interest you get from your investments. When comparing returns, think of Money Market Funds (MMFs) and Real Estate holistically. Many people make the mistake of making comparisons as though they are types of the same product.
For example, while Money Market Funds (MMFs) and Real Estate can give monthly returns, the latter also usually has over time a capital gain. The result is additional money made at the point of selling Real Estate. Remember to consider tax implications when comparing returns.
Conclusion
Money Market Funds (MMFs) and Real Estate are not necessarily comparable. In some aspects, they differ, giving varying advantages and disadvantages. Your investment goal and financial state can help you determine the best way forward.