Greetings, First of all ! Welcome to our today’s blog on Direct Stocks vs Mutual Funds on our website meriSIP.com
Choosing between these two Investment Vehicles totally depends on your time, Risk Taking ability and Interest.
We will keep reiterating the following lines in most of our posts “This depends on Your Profile i.e. Risk Taking capability, TIme Horizon, Goals, Etc.” Why so? Because “Personal Finance is more personal than finance”
We will provide you the risks and rewards involved into these two but for most of retail Investors Mutual Funds are the best without any discussion. But the choice is left to those individuals who are highly knowledgable and have the odds in favor when they do predictions onto the earnings of some stocks (if investing for Long Term). They must know the following things :-
(a) How to value a Company’s Share price?
(b) How to construct a portfolio of stocks for diversification?
(c) How & when to re-balance their portfolio?
(d) Why to have more than two or three themes in their portfolio?
and many are left !
If an Individual does not want to take this much of load, and still want to participate into India’s growth Story, then they should start Investing into Equity Mutual Funds (after consulting their financial expert). And most of retails fall in line with this route.
Why people get allured to Direct Stocks?
During Bull markets, when everywhere people discusses the market movements, stock names, etc. They heard it from someone that so and so stock rose 10 times. Then comes the Day Dreaming moment when Individual start dreaming and find himself on ninth cloud having ABC stock which will become 20 times within no time and the individual have 40% of his or her portfolio into that one stock.
Ladies & gentleman, stop day dreaming now and start living with the reality. Just a statistical check onto that Dream first otherwise you will become gloomy. There are more than 4000+ stocks listed on NSE today and more than 5500+ if I include BSE as well. What is the probability of you holding that stock ? It is =1/4000 = 0.0000025%. It is the probability that you will buy that stock. Now, can you hold it upto 20 times, think again and read the question again. And now answer it, Let me make a statement, ” when this stock will become double, you will be the first person on the earth to sell that.”
If such is the case then why so much of confusion is around choosing between Direct Stocks vs Mutual Funds?
Get rid of this confusion and start your SIP in equity mutual funds if you are really interested into Stocks, and let the time and compounding play its game.
Final Suggestions :-
(a) Do not Invest into direct stocks (if you do not know the intricacies involved). Once, buffet said
Never test the the depth of river with both feet
(b) Start SIP into Equity Mutual Funds as soon as possible, for letting the compounding play its game.
(c) Make a diversified Mutual Funds portfolio based onto your goals. (Meet the financial experts if you need help doing that)
Conclusion:-
No doubt, Individual stocks can be much rewarding but you should also have no doubt that they can be worst as well. And more chances are of being worst as common people do not know much about the stocks, its valuations, its earnings, etc. Choose Mutual Funds over to Direct Stocks. Do not hesitate to meet Mutual Funds Expert, in case you think you need one.
nice post