Q. Which investment is better, mutual funds or direct stock exchange? Gaurav Kapoor
A. If you have to make a choice between investments in the stock market directly or through the mutual fund route, consider the following points before you make a decision:
If you have an expertise about the stock market and can identify right stocks, you can opt for direct stock investment. You should also be able to select the right shares and mitigate the volatility risk. But do note that investing in stocks is riskier than investing in mutual funds.
While direct investment in shares can give you a very high return in the long-term, you need to have patience, risk appetite and knowledge about the stock market, otherwise, you may end up bearing significant losses.
On the other hand, if you are new to equity investment or lack its expert knowledge, then investment through a mutual fund is the best option for you. Corpus held by the mutual fund is managed by the highly skilled fund managers. So, you don’t need to worry about the selection of stocks and volatility as everything is managed by them.
However, if you really want to try stock market trading first hand and ready to take a very high risk, then it is advisable to first learn about the techniques of investing and gradually building up your investment portfolio.
However, if you don’t want to get into the nitty-gritty of direct investing in the stock market, then the mutual fund is a simple and easy vehicle to start your investment. It also allows you to diversify your investment into other asset class like debt mutual funds and gold.
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