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Equity Mutual Funds vs Stocks: Which Is Better?

IndianMoney.com Research Team | Updated On Wednesday, November 14,2018, 04:17 PM

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Equity Mutual Funds vs Stocks: Which Is Better?

 

 

 

This is an interesting debate. Is it better to invest in equity mutual funds or stocks? After demonetization, banks were flush with cash. They cut FD rates and SB rates. The Government cut interest offered on small saving schemes like PPF, NSC, SCSS and so on.

Citizens rushed to invest in mutual funds, particularly equity mutual funds. AMFI which sets industry standards in the mutual fund sector, started a program called Mutual Funds Sahi Hai. The aim was to educate the common man on the benefits of investing in mutual funds.

Now to the big debate… Should you invest in equity mutual funds or stocks? Want to know more on mutual funds and investment planning? We at IndianMoney.com will make it easy for you. Just give us a missed call on 022 6181 6111 to explore our unique Free Advisory Service. IndianMoney.com is not a seller of any financial products. We only provide FREE financial advice/education to ensure that you are not misguided while buying any kind of financial products.

 

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Equity Mutual Funds vs Stocks: Which Is Better?

1. Invest in equity mutual funds or stocks?

Investing in equity is not complicated. You have to invest either in equity mutual funds or stocks. Both investments have the same rule. High returns at high risk. But there’s a difference. If you are new to equity, invest in equity mutual funds and not stocks. If you invest in equity mutual funds, there’s a fund manager to help. No such help on investing directly in stocks.

Should you avoid stocks totally? It’s not that all beginners lose money in stocks. Many first time investors have done extremely well in stocks. It’s just that the odds are against first time investors in stocks. Out of every hundred first time investors, just 5-10 succeed. Those who do might suffer losses, before they see profits.

SEE ALSO: How To Choose Your Mutual Fund Portfolio?

 

2. Beginners must invest in equity mutual funds

It’s plain simple. If you are new to equity, invest in equity mutual funds. Investing in stocks requires time, effort and knowledge a beginner might not have. Equity mutual funds are all about diversification. Equity mutual funds invest in stocks across sectors. This protects your investment.

Mutual funds have strict rules of investment. Mutual funds could have to invest in at least 15-20 stocks and a certain percentage of the total portfolio is specified.

Take a look at some of these rules:

  • An equity mutual fund must invest in stocks which are spread across at least 5 sectors. A percentage of investment is specified.
  • An equity mutual fund must invest a specified amount in Large Companies. These Companies may be blue chips and are very stable.

SEE ALSO: Mutual Fund for Housewives

 

3. Mutual Funds help invest with less money

To be a good investor in stocks, you require a lot of money. You might require to invest a few lakhs, to see large profits.  You can regularly invest a few thousands in mutual funds and ELSS a type of mutual fund, even helps save tax. You enjoy Section 80C benefits on a maximum investment up to Rs 1.5 Lakhs a year.

See Also: Stock Exchanges In India

Don’t fret. You may take this advice with a pinch of salt and invest in stocks. You might even enjoy success and be one of the lucky few first-timers in stocks. Be Wise, Get Rich.

 

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IndianMoney.com Research Team

The research team at IndianMoney.com comprises of certified and experienced professionals who share the company's vision to make every Indian financially literate by equipping every Indian with right and unbiased advice. IndianMoney.com research team provides newsletters, articles, videos and FAQs on various financial products and concepts only to help you make wise financial decisions.

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