Mutual Fund Vs. Stock: Where should you invest?

As a woman, making an informed decision on where to invest your money begins with understanding your options, goals and only then, putting forward your hard-earned money. A common confusion is: What’s the difference between the mutual fund and share market? And should you put your money into mutual funds or into stocks? Don’t worry, we’re here to clear away any doubts you may have!

What are Mutual Funds?

A Mutual Fund pools money from various investors and puts these funds into different assets depending on the types of MF such as equity, debt, gold, etc., depending on the specific scheme chosen by the investor. It is professionally managed and monitored by a fund manager whose goal is to generate returns for the investors.

Example –  Seema invests in Lxme’s Rs. 100 Equity Fund through a SIP of Rs.100/- monthly. This allows her to diversify her money across different companies that the fund invests in with just Rs. 100.

What are Stocks?

Stocks are ownership shares in a company, also known as equity. Investment in direct stocks is done through a stock exchange where shares are bought and sold between individual investors.

Example – Reema uses her demat account and invests in 10 shares of Company ABC at Rs. 657/ share. Therefore, she owns 10 shares of Company ABC with a total invested value of Rs. 6570.

You can also check out the blog on “How to buy shares for the long term”

Stocks vs Mutual Fund

Parameters	Stocks	Mutual Funds
Meaning	Ownership shares in a single company that can be purchased and sold on the stock exchange.	A pooled sum of money that is expertly put into a portfolio of securities.
How to Invest	You need to open a demat account.	You don’t need to open a demat a/c. If you invest through Lxme, you can get access to expert-curated Mutual Fund Plans!
Risk	Higher risk	Lower risk, as compared to investing in individual stocks
Asset Classes	You can invest in equity.	You can invest in equity, debt, gold etc.
Price	Its price fluctuates as per the stock exchange.	It has a Net Asset Value (NAV) that is updated at the end of the day.
Suitability	It is suited for experienced investors.	It is suited for both new as well as experienced investors.
Cost	Higher cost	Lower Cost

Things women should consider before investing their money: stocks Vs mutual fund

Investment goals

A woman’s first step should be identifying her goals and choosing investment options that’ll make her goals a reality. Deciding between mutual fund or stock will be easier to make while keeping your goal in mind.

You can check out Lxme’s goal-based portfolios that are well-researched, diversified and curated by experts. You can start investing towards your goal with just Rs. 100!

Market Knowledge

It is a good idea to invest in stocks when you are an experienced investor who can conduct extensive research on a company. Mutual funds are actively managed by experts who monitor the fund and make important decisions about its performance.

In this way, mutual funds are suitable for everyone as they can select a particular scheme as per their goals, risk appetite, etc.

Risk Appetite

Investing in individual stocks is riskier than mutual funds as their returns are dependent on a single company’s performance. Mutual funds invest in a variety of securities and give you more exposure to the market, thus, managing the risks.

For instance, with mutual funds, you can choose the scheme as per your risk appetite as there’s a tool called riskometer on every mutual fund scheme which helps an individual know how much risk they will be taking.

Need for diversification

When you invest in stocks, you’re putting your money towards equity. Whereas with mutual funds, you can invest in multiple securities, diversifying across asset classes like equity, debt and gold and therefore ensuring you don’t put all your eggs in one basket!

Investment amount

With mutual funds, you can invest in multiple securities, diversifying your risk with as little as Rs. 100/-.

Whereas, if you invest directly into stocks, you may be able to buy 1 or 2 stocks or sometimes not even that with Rs. 100/-.

On a final note, you can avail the advantage of share market through both types of investments but there are still certain differences between investing in individual stocks and mutual funds. It’s better to invest via the MF route as it is professionally managed and allows you to diversify your portfolio.

FAQ’s

Lxme Money AMFI-Registered Mutual Fund Distributor. Mutual Funds are subject to market risks, read all scheme-related documents carefully.

Share this blog with your family and friends if you find it insightful!!

Download the Lxme app for more such content!