Stock market vs mutual funds
The investor gains from the stock picking ability of the professed fund manager. Does not have to track his portfolio and also benefits of tax exemption. In India, the investors hold more stocks than they have mutual funds. About 4.5% of the total market capitalization in India is maintained through fair funds. Where as directly holding by individual is 22% of the market value. Why should an individual buy stocks through mutual funds. Where he can pay directly and only a one time brokerage.
When you invest in a mutual funds. You get the benefit of a fund manager proficiency. Picking stocks, tracking and making sector and benefit allotment, booking profit when required everything is done by a professed fund manager. Many stock portfolios are ten years old and could be keeping stocks that are inoperative today. Such detritus sticks drag overall portfolio returns. A efficient fund managers assure that the portfolio holds good stock with possibility for long term returns
No tax on short term gains
When you control your own portfolio, there will be some buying and selling. If stocks are sold out with in one year you have to pay 15% of short term capital gains tax. There is no capital gain tax on the stocks that sold by the funds in a mutual fund. This can add up to outstanding welfare for you as an investor in that fund. Ofcourse the one should must hold ones fair funds for a year at more longer to keep away from the short term capital tax on the investment.
Low cost of investing
Funds houses work out with mediator and therefore have low costs. You will be probably pay 0.5-1% as brokerage. If you buy and sell shares. You also have to pay for demat charges due to this scale. Mutual funds pay only a small amount of the brokerage charges to individual investors. This benefits gets incidentally passed to you as a mutual fund investors you also don’t need a demat account.
A well wide ranging portfolio should have about 25-30 stocks. But, such portfolio can be make only with a large corpus. An person might not have sufficient funds as mental range of frequencies for a wide range of portfolio mutual funds provided instant diversification. Since you buy units of the fund that invests across several stocks, where you receive wide range of benefits with out investiture Corpus
In a stock market. There are lot of successful stories where someone got quick rich by investing in stock market. But we require a lot of patience and analysis and complete trust in what you have choosen. If you want good returns in a short time of period. If you think you can research well, you can go for stock market directly. But the risk are also more. Where it comes to mutual funds it is known as deliver good returns. So you can expect some good returns from mutual funds but not like stock market. Chances of becoming a super success in short time of period is impossible for all of them because the money is diversified across different stocks.
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