Best investment option: Stocks vs mutual funds

Investment option stocks vs mutual funds


Investment is a great option if you are looking for raising more money out of your savings. And infusing your money in stocks or mutual funds is one of the best approaches for generating a high return. But, if you are thinking that you will be earning high returns without any risk then the stock market is not your game.

Your willingness to take risks will decide the level of your profitability. In simple words high the risk, the higher will be the profits. And to derive the best clarification about the main instruments of the stock market, we have brought out the key points of stocks vs mutual funds.

But, before jumping into a differentiation between the two instruments. Let us acquire some facts about stocks and mutual funds.

Stocks/Shares

The stocks or shares are the instruments that signify one's ownership in the company. If you are buying a part in the company in form of shares then you will become a shareholder of that company. And being a shareholder you have to bear losses or profits depending on your own analysis.

Stocks/shares are considered one of the riskiest investment options because, in this investment option, the investor has to track the performance of his procurements on his own and make the right decisions at the right time. An aspirant with no or less knowledge about the company he wants to invest in can lead to a big loss.

Mutual funds

Mutual funds are the combination of securities that diversifies the money invested by the investors into various financial instruments such as stocks, debts, bonds, and various assets. It brings in a pool of investments that is combined with different instruments for increasing profits and reducing the level of risk.

The value of a mutual fund is revealed by its NAV( Net asset value) and it allows a buyer to invest on monthly basis with SIP (Systematic investment plan) or a one-time basis. Unlike stocks, the best part of mutual funds is that it involves a fund manager who manages the funds and gives his 100% to generate valuable profits for the investors and reduce the level of risk.

Now, let us derive the main difference between stocks vs mutual funds for a better understanding.

You may like-Zerodha success story

Stocks Vs Mutual funds

We will study the main differentiation between stocks and mutual funds on the basis of the following parameters:


Time- Time is a very crucial factor if we talk about the stock market because stocks are being traded within the specified time range and to analyze the stock market one has to invest one's time and efforts.

Talking about mutual funds then you can skip from investing your time and efforts as the fund manager is there for you. He is infusing his knowledge to bring out higher profits for the investors.


Profitability- Both the instruments does not guarantee you a 100% profit. And if talking about the stocks then they can offer you great returns if procured after a complete analysis of the business model and future trends. You have to update yourself with current trends of the company, position, and inspect the financial statements for better returns.

Mutual funds on the other hand are less risky and less profitable as the money invested by the different investors is further invested into different assets and securities. For example- if the total money introduced by the number of investors is Rs. 1000 then this amount is further diversified into different sectors, like Rs. 200 in stocks, Rs. 300 in bonds, Rs. 500 in debt instruments. So, it reduces the level of risk.


Control & authority- An individual investing in the stocks has complete control over his holdings and can sell or buy it any time. It reduces one's dependence on others for regulating the transactions.

Mutual funds do not give you the power to invest in a specific sector. You are dependent on the fund manager who is regulating the transections and hold the complete authority to invest. Eventually, the growth or fall of a mutual fund is in the hands of a fund manager.


stocks vs mutual funds

Tax implications- Whether going for a mutual fund or buying stocks, one has to pay the taxes which are imposed by the financial authorities. Apart from the taxes levied on short term and long term gains, we have to pay certain charges while selling the stocks that are held in the portfolio of the investor.

On the other hand, if our mutual fund manager is selling the stocks held in the mutual portfolio then the investors are not liable for paying any charges which otherwise have to pay while selling stocks.

You may like- Asset management vs wealth management

Ease of investment- It is one of the prominent factors that depicts a crucial difference between stocks vs mutual funds. One must know that buying stocks for sufficient profit requires a good sum of money as an investment, that prevents various aspirants to invest in the stock market.

While mutual funds facilitate an option for SIP that allows you to choose an affordable plan and you will be paying money every month as per your selected plan. It prevents one from being burdened with paying a huge amount for investment.


Take away

We tried to bring in deep knowledge about the two main financial instruments and also brief you with the main contrasting point of stocks vs mutual funds for complete clarity. From the above factors we are not provoking any individual to invest in stocks or mutual funds nor we are bias for any of the two instruments.

We are just sharing our knowledge with the readers for making wise decisions when even entering into any of the investments in stocks or mutual funds.

Also read 

Fantasy sports platform- Dream11 business model