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I had purchased a home year ago and given it on rent. The rent I'm getting is only 5% of total cost of home while stock fund industry (mutual fund) is paying 20% minumum (reports from my country here mufap.com.pk/nav_returns_performance.php?tab=01 ) i.e. I'm getting 15% loss every year and that is a big amount.

I'm not really assure if my home also increase it's value by 15% every year. But I don't think it will be.

Now I'm thinking to sell that home and invest all of my money in mutual growth fund. Can you please advise me in this regard

Note: Even one fund has given 55% in 365 last days ( See 'JS Islamic Fund' here http://mufap.com.pk/nav_returns_performance.php?tab=01)

Thanks

  • Do you owe money on the house or has it been purchased for cash? – Pete B. Mar 2 '15 at 14:07
  • I own that property. – Sheikh Naveed Mar 3 '15 at 4:47
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  • Most importantly, you're looking at the funds' returns for only the last year - that means nothing! The economy is doing relatively well recently. Those 20% or 50% returns can just as easily be -20% or -50% for some years. To get a meaningful picture, you have to look at least at a 10 year average.
  • Pakistan's long term average inflation rate is about 8%. You can assume that your home's value will increase at that rate in the long run.
  • Perhaps you can increase the rent?
  • The biggest reason to change your investment would be not returns but the fact that you're currently not diversified at all. What if there is an earthquake or fire? Are you insured against that? With a stock fund, a "total loss" scenario is pretty much impossible.
  • If you're going to invest in funds, read up on "passive investing" and pay attention to the expense ratios of the funds.
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  • • Thanks Michael. I really like 'your home's value will increase at that rate in the long run' comment. I haven't thought like that before. • I had researched much about 'passive investing' i.e. index fund (inspired by Dave Ramsay) but didn't find that in my area • Expense ratio? I've listened it first time. Thanks for indicating. I'll dig into it. – Sheikh Naveed Mar 2 '15 at 9:50

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