Which one is a better way to make an investment, mutual funds or shares?
People love to save. And when it comes to saving then it’s hard to decide the best way to do it. Everyone prefers a different method to save their money. In this article, we are going to discuss that which one out of mutual funds and shares is a better way of investment. When you want to choose between the two, always remember your capability to handle risks.
Shares are the physical representation of a small portion of a company’s value that is traded in the stock market. In case a company goes public, the total value of the company is calculated by adding the value of the company’s shares in the stock market and/or owned by persons. While mutual funds are a collection of stocks and bonds that are managed by fund managers in an Asset Management Company (AMC). An equity mutual fund constitutes of stocks whereas debt mutual funds, on the other hand, constitute government bonds and securities.
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Here are some differences between Shares and Mutual Funds:
| SHARES | MUTUAL FUNDS |
| It is used as a business’s growth strategy. | It is an investment for all the individual. |
| For trading in Shares, it is important to have a demat account. | For investing in mutual funds, there is no need to have a demat account. But sometimes you can use a Demat account to invest here. |
| It is hard to exit any stock from your portfolio. | As you know Mutual funds can be a part of your stock portfolio. It is altered by your fund manager and you have no control over trading. |
| Direct investment in shares, it is important to have a strong knowledge of the company and the stock market. | Mutual Funds portfolio is handled by the Fund manager. |
| For investing in shares, it very important to have more time and dedication. | It is passive in nature which means it is an easy way of making money. |
| It is hard to do fixed or direct investments in Shares because the price of it changes constantly. It needs good attention and quick trade decision. | A person can use a fixed monthly SIP to invest in mutual funds without any need to time the investment. |
| It doesn’t provide you with any protection which makes your stocks unstable. It is hard to earn a profit unless and until you are investing in many stocks. | It holds an expanded portfolio. This the reason why we earn a profit. |
| You can only get quick returns if you buy and sell the shares at the right time. | It has a longer-term growth trajectory and will give you returns after your fund gets mature. |
| Here, you have to pay the brokerage to the brokers. | Here, you have to pay the fund management charges, back-end load upon sale, a front-end load upon initial purchases, etc. |
| It is hard to deal with juggle with a large portfolio by yourself. | It is easy to handle the portfolio using the MF as you have an option of hybrid funds. |
| It allows for benefits under Section 80CCG of Income Tax Act, 1961. | Benefits under Section 80CCG and 80C of Income Tax Act, 1961. |
So at last, we can say that whether you want to invest in mutual funds or shares, both are the good options. The time for which you want to invest also plays a very important role in making a choice. Mutual funds are a great choice if you are an amateur and want to have constant growth in money. While Shares can the best choice for a person with the great knowledge about the stock market and have enough time to bear risks.
