Your question has two major elements and the second major element another three sub options, as follows:
- Investment Timeframe - Five years
- Investment Options:
- Property
- Stock Market
- Mutual Funds
All value investors, including myself, do not consider property as an sensible investment option for the simple reasons, it is:
- Illiquid
- Return on investment by way of rent is unjustifiably low
- Capital Appreciation benefit is available as in shares and mutual funds but the quantum is more dependent on luck.
The investment options left are only stock markets and mutual funds, but before I address them let me take-up the investment period element.
An investment horizon of five years is very short. twenty years is minimum and about fifty years is ideal. Only when you invest for such long time, the law of ‘Miracle of Compounding’ will have the opportunity to work for you and make you really rich and wealthy.
Coming back to investment options of stock markets and mutual funds, both are good. Direct stock market investing requires special knowledge which you can acquire from the book, Intelligent Investor - The Investors' Bible and you may also kindly visit my blog,Value Investing.
As far as mutual funds are concerned, they are the best choice for those who do not wish to or do not have the time required to study stock market investment. One of the problems with mutual funds is that they charge a heavy fund management fee. There is yet another version of the mutual fund called an ‘index fund’ or ‘exchange traded fund’ which mirror popular stock market indices like the S&P BSE Sensex or NIFTY 50, where the charges are low and very reasonable.
