Mutual Funds or Stocks, what to choose for investing into equity?

Disclaimer: This is not an investment advice and aims for information sharing only.

FIRSTLY: When you invest in equity through mutual funds, you get the benefit of the fund manager’s expertise. That might possibly ensure the mutual funds holding good stocks with potential for long-term returns. A fund manager carefully picks stocks, tracks them and books profits when required. Most importantly, the fund managers track stock markets everyday 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.

SECONDLY: A mutual fund usually holds 40 – 50 stocks in its portfolio and is well diversified across different sectors and company sizes. You receive at 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. 

FINALLY: It is not always about choosing one or the other randomly. 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 through a particular instrument you choose accordingly.

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