Stocks are far more risky than equity mutual funds. Various equity mutual funds spread your investment in all sectors and industry and therefore reduce volatility in your investment. You have to do extensive research to choose the right stock before investing your money. In the case of equity mutual funds, this research was conducted by experts, and professional fund managers manage your investment. This service is not free and is equipped with annual management costs charged by a mutual fund house.
When investing as a beginner If you are a new investor with a little or without experience in the stock market, it is best to start your equity investment through mutual funds because it is not only a relatively lower risk, you also have a fund manager who manage your investment. You also have various types of equity funds and you can choose the best plan to achieve your financial goals based on risk tolerance.
Risk and return It has been determined that the equity of various mutual funds has the advantage of reducing risk by diversifying the portfolio. You can choose to invest in equity funds such as index funds, flexible funds, sector funds, elss or large funds depending on your risk and return expectations.
Tax increase You don't get tax benefits if you invest in stock. However, you are eligible for tax reduction to a maximum RS 1.5 lakh per year under the 80C section if you invest in a tax-saving mutual fund called Elss. You can invest in ELSS for twin-benefit returns and tax savings that defeat inflation.
Diversification A well-diversified portfolio must include at least 25 to 30 shares, but it will be a difficult task for small investors. With the equity of various mutual funds, investors can also obtain a diverse portfolio managed by fund managers. Fund purchase units allow you to invest in several shares. You can invest through SIP where you enter a small amount regularly in equity funding schemes.
Control on your investment In the case of equity mutual funds, the fund manager decides on shares to be included in the portfolio. You don't have control of the shares which must be chosen and for what duration.
Time You don't need to spend a lot of time researching individual shares if you invest in equity funds. Fund managers take care of your investment and the research team selects the right stock. However, you must check important parameters such as the Fund portfolio, AMC trace record, assets based on management and investment force from fund managers before investing your money in equity funds.
Investment Horizon You must invest in stock and equity funds with long-term investment horizons. However, you must be able to set the time out of your stock. You can follow the purchase and resistant strategy with equity funds to achieve your long-term financial goals.
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