Should you Invest Directly in Stocks or Take the Mutual Fund Route?

The dilemma of investing in stocks or mutual funds is most often faced by new investors. Especially when the markets are on a roll, they believe that investing in stocks would be a better option to beat the returns of mutual funds. Also, recent rallies, like one from Dalal Street, have created a perception that ‘direct stocks help in making money easily’.

Investing in stocks can be riskier than investing in mutual funds, as stocks tend to be more volatile. On the other hand, mutual funds offer diversification and liquidity, which can help to reduce the risk of investing in stocks. Ultimately, the decision between stocks and mutual funds depends on the individual investor's risk tolerance and goals. It is not a question of whether you should invest in stocks or take the mutual fund route; rather, it is a question of whether WHO should invest in stocks and whether WHO should consider mutual funds.

Let's break down the considerations for each option!

Direct Stock Investing

Mutual Fund Investing

Should you invest directly in stocks or take the mutual fund route?

The answer to this is quite simple! See, direct stocks are specifically for those who have the time & energy to dedicate to it, as it is a much more hands-on way of investing. Secondly, you should be well-versed & have a keen inclination towards to know about businesses, to understand how businesses are run and what would make them keep growing in times to come. Furthermore, you should be able to understand the deep corrections in your stock holding that may fluctuate as per the market volatility. Also, you should have sufficient surplus to invest/build a reasonable portfolio in more than different stocks. If you have 1 or 2 stocks in hand, the situation can be more riskier!

Now when it comes to investing in mutual funds, limited knowledge would be sufficient as your portfolio will be managed by professional fund managers. With their involvement, your time gets safe & during market volatility, they would know what best to do! By investing in a mutual fund, you can get a well-diversified portfolio of stocks even with a small investment of Rs 5000 a month.

Bottom Line: It takes a certain amount of skill, experience, time commitment, and a good temperament to invest in equity. If you have the time, expertise, and risk tolerance to invest directly in stocks, it can potentially offer higher returns, but it requires diligent research and monitoring.

On the other hand, mutual funds provide diversification and professional management, making them suitable for investors seeking convenience and a hands-off approach. These are the deciding factors, and we believe that mutual funds are the best choice for most retail investors!

Disclaimer: The above information should not be relied upon for personal or financial decisions, and you should consult an appropriate financial professional for specific advice. The information presented under our newsletter and blogs is solely for informational purpose.