Mutual Funds or Direct Stocks, which one to choose for investing in the equity market?

Mutual funds or direct stocks? How to approach equity investing? Let us take a look at few factors that might help answer our question.

Expertise and time

When you invest in equity through mutual funds, you get the benefit of the fund manager’s expertise. That might possibly ensure that mutual funds hold good stocks with the potential for long-term returns. A fund manager carefully picks stocks, tracks them, and books profits when required. Most importantly, fund managers track stock markets every day and can manage the risk professionally. But, if you have the expertise and time to track your investments daily, investing in stocks might be a suitable option for you.

Diversification

A mutual fund usually holds 40 – 50 stocks in its portfolio and is well diversified across different sectors and company sizes. You receive the benefit of diversification even for smaller investment amounts, which is not possible with direct stocks. So, if you are focussed on a few particular stocks only for your investment, choosing to buy stocks might be suitable for you.

Goal and risk appetite

Finally, it is not always about choosing one or the other randomly. The selection of instruments mostly depends on the financial goal (the purpose and the time horizon) you are investing for, your knowledge and abilities as an investor, and your risk appetite as an investor. When you know the benefits and possible disadvantages of investing in a particular instrument you choose accordingly.

Disclaimer: The information provided in this blog is for general informational purposes only and does not constitute professional advice. While full efforts have been made to ensure the accuracy of data and numbers, no responsibility is taken for any errors or omissions. Tax implications on insurance, investments and returns from related products may change due to updates in tax laws. Always consult with your financial advisor or insurance expert before making any investment or insurance decisions. The author is not responsible for any financial losses or damages incurred as a result of relying on the information in this blog.

Disclaimer: Mutual Fund investments are subject to market risks, read all scheme-related documents carefully. The NAVs of the schemes may go up or down depending upon the factors and forces affecting the securities market including the fluctuations in the interest rates. The past performance of the mutual funds is not necessarily indicative of future performance of the schemes. Mutual Fund is not guaranteeing or assuring any dividend under any of the schemes and the same is subject to the availability and adequacy of distributable surplus. Investors are requested to review the prospectus carefully and obtain expert professional advice with regard to specific legal, tax, and financial implications of the investment/participation in the scheme.

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