Stocks Or Mutual Funds? Which Is Best For You?

                           Stocks VS Mutual Funds  Hello my dear friends, I hope you all are doing well. Today I will discuss which is the b...

 

                        Stocks VS Mutual Funds 

Hello my dear friends, I hope you all are doing well. Today I will discuss which is the best investment tool between Stocks & Mutual Funds for new investors.

So let's start Investing With Ease.

⦿Which is the best for new investors or should we invest in both? These are the common questions raised in our minds while investing. Now there is another part that which is best between Direct Mutual fund or Regular Mutual fund(We will discuss it in another blog so you must stay tuned).

Now there is no specific answer to this question because it depends on your situation and your knowledge about investing.

Let's take an example of you doing work alone Now, if you are an expert at that work, you might do it easily. But if you are new at that work or don't want to do it by yourself, you might hire an advisor or an expert on it. 

⦿That same happens with Mutual funds, you are just hiring an expert to manage your money.

▶ Note: Here I will discuss Equity Mutual Funds (there are various other mutual funds which we will discuss later). And I am avoiding the charges of Mutual Fund and Stocks buy or sell, tax and others because these factors we will discuss later in a separate blog.

⦿Mutual Funds:

➤Pros:

1) Mutual Fund managed by a team of experts, the experts observe the market with their experiences. This gives a huge advantage for new investors.

2) Mutual Fund companies and their managers can directly access the company's management information with their sources and relations.

3) In Mutual Fund an investor gets more diversification even with a small amount, because the fund house collects money(funds) from many investors(even if it is a small amount), and with that money, they can buy any stock at any price. This helps investors to get more companies in their bag(portfolio).

4) Personally, I believe people choose MF because they have their own job, business, and other things and they don't have time to read all balance sheets, P&L statements, Profit growth, companies performance, etc. And for this MF gives us ease of convenience.

                       ✦ Just like this website gives you the ease of knowledge about investing, so make sure to bookmark this website.

➤Cons:

1) As I discussed earlier that MF companies have access to the company's management, which is a good sign but sometimes it can backfire because, a companies management always shows their good work and future growth of the company, sales, and fundings, etc. By this, the MF manager can get influenced and take the wrong decision. This may cost you losses.

2) Now who doesn't love their jobs, in this case, these fund managers get lots of money for their work and for this reason they don't want to lose their jobs. Now for this, they play it safe because if they face some loss, they can be replaced by any other fund manager. They avoid taking different paths or we can say small-cap companies to avoid risk. And this causes lower returns for MF subscribers.

3) Many MF companies focus on AUM (Asset Under Management) because if they get more money from investors, they can earn their commission from that. Sometimes, MF companies focus more on advertising, publicity, and launching new NFOs( New Fund Offerings). For this reason, investors might get lower returns because their fund managers are focusing on other funds than that fund.

4) In investing Entry & Exit matters a lot, but in this case, the fund manager doesn't have the right to enter in a stock at his/her chosen price and exit at his/her chosen price, because in the bull market when cashflow is coming they can't hold money, they have to buy the stocks at any price (because of the regulations), same happens in the bear market they can't buy stocks if people are withdrawing they have to sell it.

➤➤Fund managers and MF came under certain regulations that they have to follow. Funds can't hold cash after a certain percentage, because it is regulated by the securities and exchange boards of a country.

⦿Stocks:

Now let us talk about stocks, here very important points will be discussed down below, that must be understood by any new investor. Here I will interchange the order of pros and cons, so the new investors get to understand the importance of it.

➤Cons:

1) Stock takes time & patience to understand and learn. No one can learn how to invest in the stock market just in one night, and it is not a formula to get rich overnight it takes time.

▶▶To understand investing, I will suggest you, follow this website and I will try my best to help you in your investment journey.

2) In MF the fund manager has some guidelines that he/she must follow like he/she must invest in large-cap, mid-cap, small-cap, etc. So in MF, there was a disciplined manner to invest. But when we invest in stocks we have full freedom to invest in any stocks, now if we invest our whole money in two or three stocks and they somehow crashed, then we face huge losses. So always diversify your portfolio.

Now discuss some pros😀

➤Pros:

1) If you see my first cons of stocks it said that to understand stocks you need time & patience, it is also a pro but why, let's know it.

If you analyze any stock then you are analyzing the company, its Business, Annual report, P&L, Profit growth, etc. Also, you are knowing that particular sector. And if you analyze many stocks then you are understanding 90% of businesses worldwide.

2) As I said earlier that Entry & Exit timings are very important for investing. And in stocks, you have full control over it. So when the market crashes you can buy the best stocks at a discounted prices and sell them at higher prices. It means you are independent and you can do what you want to do.

▶▶ So in stocks you can beat MF's returns if you have done it correctly, it has a higher scope. But it is also very risky at the same time.

✦Now after all this if you are still confused about which is the best for your investment then let it know in the conclusion part. But before that, if you want to invest in stocks then you need a Demat Account if you don't know how to open it or which is the best broker for it, you must consider my What is a Demat Account & best broker for you... blog post.

Conclusion: 

⦿ If you are new in the investment world or you have some specific goals to fulfill in a specific time frame then you must consider MF. Because we cannot risk your goals like: Home, Car, Education, Pension, etc, that you have to fulfill.

⦿ If you already secured your goals and have extra cash that you can risk or you are a student and you have some extra pocket money, then you must go for stocks and learn about it. Because if you are a student and start now then, in the long run, you will learn how to analyze stocks and it will generate more profits than MF.

⮞⮞That's it for today I will meet you in the next blog, stay tuned till then. Stay invested, stay happy. Follow this website for more investing strategies. Till then bye-bye😃😃.

Editor:  Sk Elaf Ahmed.