Investment done at any age is a good way to get a large amount of corpus on maturity. While doing investments, many people get confused whether to invest in equity, mutual funds, SIP or through other Investment instruments available. It has always been a tricky question whether you should invest directly in Equity or via Mutual funds. These decisions often make it difficult for people to decide how to invest. In order to avoid any confusion, regarding this, let us help you explain in detail about investments done through equity or mutual funds.
Investment done through any of the forms are done with the sole motive to earn profits at the end of the day. But there are two ways of investing. Either you can do it directly through equity i.e. buying and selling stocks yourself, which does require some form of dedication and willingness to understand the market. The other method is by investing through mutual funds backed by equity. In both the cases, sufficient knowledge of the market, proper market analysis and implementation and execution at the right time is required.
Best Points For Comparison Of Investing
Below mentioned are few points which will help you understand better about where investment can give higher returns and which one to select:
Volatility : – Volatility is higher in stocks in comparison to mutual funds. When comparing stocks and mutual funds for the past 6 months or one year, it is seen that stocks show significant levels of volatility compared to mutual funds. The volatility in the valuation of stock prices can easily be triggered by an announcement, performance or an event, whereas same is not the case with mutual funds as it is diversified.
Research and time :- One should consider investing in direct equities if you have the adequate time to invest in research and monitor the timely activity going on in the market. Along with that, one also has to invest considerable time in keeping abreast of the economic developments going on to understand the equity price fluctuations. However, if you do not have a lot of time to keep pace with market changes, latest trends etc, you can make investments in mutual funds. Investing in a SIP through mutual fund is the best way to invest.
Long term investment : – If you are looking for a long term investment, in that case, mutual funds can be a better option as they accumulate higher returns over the years with less risk factor associated with them. Many types of mutual fund options are available for long term investment. Direct equity trading i.e. buying or selling stocks on your own is considered as a short term profit.
Short term gains : – Direct equity is the best form of short-term gains if you have a clear idea of the market and your perspective is clear as in when to buy or sell the stocks. If you think you are able to generate the fair amount of income from these sources, the sale and purchase of stocks on a daily basis can be a good idea. However, it is quite important to understand that the person who is trading in stocks directly needs to have a clarity of the market and have its complete knowledge.
An amount required for investing: – Depending upon the amount of investment, there is a huge difference between direct equity and mutual funds. When you can simply start a mutual fund with as low as INR 500 – 1000, trading in stocks requires a considerable amount of money, to begin with.
Which Is Beneficial: Direct Equity Or Mutual Funds
With a lot many factors discussed above, we come to the understanding that there are different benefits in both the cases. However, if you want to go for long term gains with small amounts of investment, mutual funds are the option and if you have a large sum to take a risk and are looking forward to short term gains, you can select direct equity.
Mutual funds Is a better choice
If you wish to enjoy a long-term return on your money, the mutual fund will be the better option. Also with research and surveys conducted by many financial companies, it has been seen that mutual funds performance has outweighed that of equities.
Seeking Help Of A Financial Advisor
You can always take the help of a financial advisor if you are not aware of the market trends or how to acquire the best knowledge. A financial advisor can also advise you to diversifying your portfolio or explain the best option out of the two i.e. Mutual funds or Equity. Download Fintoo app to Invest online.
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