Mutual Fund vs. Stocks - A Crisp Similarity

 

When we talk about any investment, always a thing comes in our mind which is " where to Invest " . This is actually a matter of fact because this is a question whose answer is different for every investors depends specifically on the category and priorities we give to our wants to decide on avenues to invest in.

Looks very Complicated ! Let me make it clear.

We are Human Beings and our Needs are limitless and unsatisfied. we set priorities and timeline for the wants to be satisfied within a stipulated timeframe. For every want, there is a kitty to justify. Example: For an Old aged Person, His savings are more important and would require in a very short time do he prefer to put it into Fixed Deposits with Banks and NBFC's.

Similarly, For a Young Investor, this time horizon stretches so he put his money with different riskier avenues such as stocks and Equity. Riskier here does not only signifies the equity market only because it is associated with all investment avenues depending upon its intensity to impact and its nature.

Mutual Funds comes into the picture here where we get Equity as well as Debt options to invest along with categories. But, if we compare it with stocks then we must take Equity mutual funds only as stocks itself a Equity Product.

In Equity Mutual Funds, A fund manager decides the shares or stocks to purchase and allocates its proportion in the Particular Fund on the basis of various strategies and taking into consideration the minimum and maximum permissible limits of a stocks by regulator of Fund. Once the allocation done , he manages the fund performance by churning the portfolio time to time and generates profit out of it. This profit then distributed either in the form of dividends ( in case of dividend option) or fund NAV (net asset value) . Here, the investors need not to worry regarding what and when to buy or sell the stocks and for which he pays a nominal management fees to the fund manager.

Whereas, in terms of stocks, An Investor is the sole responsible for the purchase and selling of stocks starting from selecting and choosing the sector and analysis of stocks. He also need to track the timing to sell to generate profit out of it. But, Here he is the owner of that stock or equity partner of the company which is not possible in the mutual Funds. In Direct stock investment , no fees is to be paid as management charges as it increases with increase in fund size.

There is Both PROS & CONS to every investment but the actual theme lies in the priorities and expertise of the investors and the most , his risk taking behavior.

Saket Kumar Singh