Stocks Vs Mutual fund

Image by Pexels from Pixabay 

Indian Stock Market is almost down by 30 % due to life threatening disease called Covid-19. Coronavirus has not only affected India but also the global economies, as if world has almost come to an end. Of course, you all will agree that we had never heard a word “Lock-down” and what it means. But today we are all locked down at home. Government urging people to stay at home as Corona virus is highly infectious. Only essentials services are open. Uncertainty rising day by day. In this uncertain time, can anyone think of investing. More commonly, people are always saving money in uncertain time, stop buying luxury, buy what is needed.

But if I say, this is good time to invest in stocks or mutual fund, would you agree? Let me ask you a question, we all are fond of branded clothes, shoes and watches and when shopping malls put on a sale on branded things, we rush malls to buy, because we think, we are getting quality goods at cheaper price, but do we really think like this in case of investing that there is a sale in stock market and they are offering 30% discount, would you be interested to buy ?. Most of us will not, because we fear losing money. But then, what about the branded clothes that we buy, how long do we use them. Yes, I agree. Investing involves risk. Economics teach us higher the risk, higher the profit and vice versa. Yet, we fear to take even a small risk. (How much should I invest in stocks).

Today we are going to understand what is better stocks or Mutual funds, these two vehicles help you reach your goal.

Let us understand this with a simple example, Raj and Aakash both are good friends. They always share investment ideas with each other. Raj is more focused and likes to take his own decisions, whereas Aakash more rely on others for making decisions in life. No need to say, Raj has love marriage and Aakash has arranged marriage.

Love happens when you spend time with a person, understand their personality and nature, their likes – dislikes, their goals in life, their compatibility, and emotions and yes, before you propose a girl, make sure she does not have boyfriend already. Hence, love marriage involves a lot of decision making. You decide whether you can stay with this person lifelong or not and once you are sure; you propose her and get married. Raj did something like this. He uses the same logic when he invests in stocks. He tries to find answers to his questions while doing his analysis on stocks.(Top 5 Mistakes by New investors)

• What this company manufacture?
• Is the company profit making?
• Who are clients or customers of this company?
• Does the company have predictable business for years to come?
• Who are competitors of this company?
• What are the future plans of this company?

Hence, Raj does a lot of homework before he makes any investment in a stock. 

On the other hand, Aakash is introvert. His mom and dad have been taking decisions for him so far. He chose his career on his dad’s recommendation. He wears colours which his mom likes the most. He is very shy when he talks to girls. All girls consider him as a little cute brother. So, love marriage is out of question and he never dared to propose a girl. Aakash got married to a girl, whom his mom and dad selected. Hence, with respect to his nature, he selected mutual fund vehicle to invest in stock market and they take decisions for Aakash.

• Mutual fund selects stocks based on their research.
• Mutual fund makes his investment simple with SIP (systematic investment plan)
• Mutual fund invests in more than 50 or 100 stocks, so his risk is diversified.
• Mutual funds take away all his worries of investments.
• Aakash invest every month 1000 Rs in a mutual fund for long term.
• Mutual funds have expertise that is required to make investment decisions like his mom and dad who selected a girl for him. 

Therefore, it is up to you, you must decide, whether you are Raj or Aakash. Nothing is right and wrong. Both have their own personalities and investment depicts personality of a person too. So, if your personality resembles with Raj, then do your homework before making investment in stocks and if your personality resembles with Aakash, then simply start SIP in mutual funds for a longer period. Whether you do any of this, never forget to evaluate your risk and track your investment, because investment is a journey and not a destination.

If you like this article, do share with you friends and families and make them aware about this basic concepts.

Stay tuned for a new topic “Best Mutual funds to invest”.