Shares and mutual funds are two of the most popular financial investing products. However, before you invest your hard-earned cash, you must first know the fundamental differences(mutual funds vs shares) between them.
When you invest in stocks, you are personally investing in the stock market, however when you invest in a mutual fund, an experienced fund manager is investing for you in either equity or debt funds.
However, Let’s discuss them in detail to know the mutual fund vs stocks.
Table of Contents
What is Mutual Funds?
Mutual funds are a combination of stocks and bonds that are professionally handled by fund managers. Fund managers are usually employed by an Asset Management Company (AMC) or an investing firm. There are 2 types of mutual funds:
- Mutual funds that invest in individual stocks are known as Equity Mutual Funds.
- Mutual funds that invest in Government bonds and securities are known as Debt Mutual Funds.
A mutual fund is a portfolio of stocks from several companies that is diversified. Money market assets, such as participatory notes and treasury bills, are also held by mutual funds.
Gold, real estate, and commodities are among the investments made by these funds. In short, Mutual Funds enable you to invest in a broad range of asset categories using your investment.
What is Shares?
A firm’s value is represented by its shares. An Initial Public Offering (IPO) is a process by which an organization allows its stocks to be traded on stock exchanges. The whole worth of the company is equal to the entire value of its stocks.
This indicates that if you own stock in a company, you are a part-owner of the business entity.
Let us look at it from the perspective of the company. If a firm wants to raise money for its operations, it has two options:
- The company can borrow money from a bank.
- The firm holds an initial public offering (IPO), in which it asks retail investors, HNI, FII, and sometimes even employees as well to buy stocks in the company thereby raising capital for the organization.
Mutual Funds vs Shares (stocks vs mutual funds)
Here are the major stocks vs mutual funds Points:
| Basis | Mutual Funds | Shares |
| Investment Type | Indirect | Direct |
| Diversification | Diversified portfolio | You can only buy one share at a time. |
| Purpose | An participant’s investment opportunity. | It’s all part of the firm’s growth plans. |
| Control on assets | A stock portfolio that has been predetermined. You have no influence over the investments. | You are personally accountable for your stock selection. You have the option to trade or leave the shares at any time. |
| Type of Investment | You can invest your funds one time or Start monthly SIP. | No rules as you increase or decrease your investment anytime. |
| Charges | Fund management fees, front-end/back-end load fees, and so on. | Brokerage charges along with Other transaction expenses. |
| Growth | Long-term gains are the only way to go | Can deliver quick profit |
| Returns | Average returns are 15 to 20% | Average returns are 15 to 25% |
| Investor Type | Anyone can invest | Basic Knowledge Required |
| Risk | Risk is low | Risk is High |
| Tax | An Equity-Linked Savings Scheme can be claimed under both Section 80CCG & 80C. | Only under Section 80CCG can you get tax benefits from direct stock investments. |
Key Takeaways About mutual fund investment v s equity investment
Mutual funds are a type of equities and bonds investment that is handled by an AMC or investment institution, whereas direct equity and Securities investment is a proactive way of investing in which you handle the buying and selling of the assets yourself.
Mutual funds provide best returns for new investors, whereas direct investment in stocks is best for individuals who are familiar with the market and can manage it on their own. Now you might fully understand funds vs shares.
How to Invest In Shares directly?
In the internet world, trading stocks has become much easier. You only need to open a Demat Account and a Trading Account, as well as fulfill KYC processes, before you can start trading shares.
You should keep in mind that if you buy shares, they are automatically credited to your Demat Account, whilst your Trading Account serves as a link between your Demat Account and your bank account.
How to Invest in Mutual Funds?
It is also quite easy, Mutual Funds investments are becoming much easier. You only need to open an Mutual Fund Account, as well as fulfill KYC processes, before you can start Investing in Mutual Funds.
Conclusion
If you want to build wealth slowly and steadily, mutual funds are a good option. However, if you want bigger returns and are prepared to trade with a keen eye on share market basics, shares are the way to go.
This is all from our side regarding Mutual funds vs Shares. Let us know your views about mutual fund vs stocks in the comment section.
Other Interesting blogs related to Mutual funds vs Shares:
SIP Investment is Good or Bad?
How to Buy and Sell Shares in India?
How to Invest in Mutual Funds without Demat Account
FAQ About stocks vs mutual funds
Mutual funds and Shares difference?
The Major Difference is Mutual funds are a type of equities and bonds investment that is handled by an AMC or investment institution, whereas direct equity and Securities investment is a proactive way of investing in which you handle the buying and selling of the assets yourself.
Difference between stock market and mutual funds?
The Main Difference is Mutual funds are a type of equities and bonds investment that is handled by an AMC or investment institution, whereas direct equity and Securities investment is a proactive way of investing in which you handle the buying and selling of the assets yourself.
Mutual Fund Vs Share market in Hindi?
म्यूचुअल फंड एक प्रकार का इक्विटी और बॉन्ड निवेश है जिसे एएमसी या निवेश संस्थान द्वारा नियंत्रित किया जाता है, जबकि प्रत्यक्ष इक्विटी और सिक्योरिटीज निवेश निवेश का एक सक्रिय तरीका है जिसमें आप संपत्ति की खरीद और बिक्री को स्वयं संभालते हैं।
Is mutual fund safe?
Yes, It is safer than direct stock market Investments as it's protect you from market volatility and offer better returns.
Are mutual funds safe for long term?
Yes, Mutual funds are the best option for long term investments if you don't have basic knowledge of the stock market.
