Which is Better to Invest in - Stocks or Mutual Funds?
July 18, 2019
While the stock market has always attracted investors, Mutual Funds are known to be considerably safer and more convenient. If you are planning to invest, what should you select between stocks and Mutual Funds? This post can help you decide.
While the Indian stock market appears to be very attractive, the rewards or returns are directly linked to your stock-picking knowledge and experience. It is generally said that more than 95% of people lose their money in the stock market. With professionals handling your money on your behalf, Mutual Funds are known to be considerably safer and more convenient. If you are struggling to select between Mutual Funds or stocks, here are a few points that can help you decide:
1. Risk Tolerance
While there is no denying that your investment in stocks has unlimited potential, it is also essential to know that stock markets are the riskiest form of investment. The higher returns potential comes with a higher level of risk too, and you can suffer from significant losses.
Mutual Funds such as equity funds are considerably safer. Asset Management Companies (AMCs) that offer Mutual Fund schemes have a professional team for every fund they offer. This makes Mutual Funds a safer option in Mutual Funds versus stocks comparison.
2. Investment Knowledge
Selecting a multi-bagger or a stock that can deliver returns multiple times their actual cost is a skill that is very difficult to master. Even the most experienced of investors sometimes end up making the wrong decisions. This is known to be one of the biggest difference between stocks and Mutual Funds.
While there is a learning curve with Mutual Funds too, it is not as steep as the stock market. Depending on your objective, you can pick the right type of fund for your investment and can remain invested in it as long as you like.
3. Investment Amount
If you are struggling with investing in stocks versus Mutual Funds, the investment amount required is also an important consideration. With the stock market, you’d mostly need a lump sum amount to generate any decent profits.
With Mutual Funds and Systematic Investment Plan (SIP), you can now start investing with as little as Rs <1,000> per month. This allows investors to begin their investment journey earlier in life and be better equipped to meet their financial objectives.
4. Investment Tracking
Investment tracking is also an important factor while selecting which is better - Mutual Fund or share market. As you will yourself pick stocks for investment, you will also be required to track your investment and make the required changes regularly.
On the other hand, with Mutual Funds, there is no need to track your investments regularly. The investment team of the AMC will manage your money and make the required changes to the underlying fund portfolio if needed.
Understanding Stocks and Mutual Funds Before Investing
To make the right selection between stocks and Mutual Funds, you first need to understand how both of these investment options work. Direct stock investments require a considerable amount of knowledge and experience, making it a hazardous option for someone who has just started investing.
Mutual Funds are fairly safe and convenient and an excellent option for beginners and professionals alike. Understand the stock market versus Mutual Funds points discussed above in detail, and you will be able to make the right decision.
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