I am a new investor and looking at long term investment. So what is better for me MFs or direct equity?
Mutual funds investments are ideal for people who plan to stay invested for a minimum period
of one year. Mutual funds are a great idea for people with a little higher risk threshold but not aware wit the day to day operations of the equity market. For a substantial fee, mutual funds allow users to make use of the expertise of the fund manager. Another incentive attracting people towards mutual funds is the tax free return and no exit load after one year.
Shares are one of the most popular investment instruments that are often used as a tool to maximise an investor’s overall return. However, you need to possess thorough knowledge on the stock market and might need to know fundamental and technical analysis to understand stock trends in the short and long term. The return from direct investment in stocks could be huge if it performs as per your expectations, but at the same time, you may lose your principal if the stock doesn’t do so well. You need to watch your stock investment portfolio regularly and stay updated with news that may impact the stock market. Also, sometimes stock markets may not perform as per expectations, so you may need to wait for a longer period to get appropriate returns.
Mutual Funds makes investing in stock markets a little simpler for you as your funds are taken care of in a very professional manner. The money that you invest through Mutual Funds is managed by highly skilled fund managers, who are well versed with market movements and use tools which normal stock investors do not have access to. While investing in equities through Mutual Funds you don’t need to study about the stocks and their performance. Fund managers take care of diversification to lower the portfolio risk. You just need to look at your own return expectation and select the appropriate scheme to get the desired return as per your time horizon. Mutual Funds give you plenty of choices to invest as per your risk capacity, return requirement and investment time frame.
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