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Abhibyakti Singh

Executive Assistant, LXME

Mutual Funds vs Stocks

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

ParametersStocksMutual Funds
MeaningOwnership 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 InvestYou 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!
RiskHigher riskLower risk, as compared to investing in individual stocks
Asset ClassesYou can invest in equity.You can invest in equity, debt, gold etc.
PriceIts price fluctuates as per the stock exchange.It has a Net Asset Value (NAV) that is updated at the end of the day.
SuitabilityIt is suited for experienced investors.It is suited for both new as well as experienced investors.
CostHigher costLower 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

What determines the price of a stock?

Price of a stock depends on its demand and supply in the market. It is also dependent on the profitability and growth of the company and the market sentiments towards the company.

What is NAV?

Net Asset Value is the market value per unit of your mutual fund investment. It is the price at which you will buy or sell your investment and this value varies daily.

Can a beginner invest in direct stocks?

Yes, you can invest if you have a demat account. However, investing via the Equity Mutual Fund route gives you multiple advantages like diversification across multiple stocks, the ability to start investing with as little as Rs.100/-, professional fund management, etc.

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

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