How to choose between stocks and mutual fund?

These are the times when many people are chasing trending investments and investing in the stock market is the most popular one.

With social media feeds flooded with stock suggestions, and news channels flashing hot stocks, it can get difficult to escape the FOMO. But here’s the thing, stocks are not for everyone. In this Investor Education Originals video, know who should invest in stock and who should invest in MFs.

Direct stock investment is for those who have the time and ability to do the market research and read into the financials of the company to pick quality stocks.

You might ask, why do we need to do research with so many recommendations floating around? Because while your friends & acquaintance might tell you about the hot stock, they might not proactively do so while exiting the stock? They will be busy planning their own market moves.

Mutual funds, on the other hand, are meant for those who do not have the time or ability to pick stocks on their own. Mutual funds are a basket of individual stocks that a fund manager creates for investors. You can easily get started with a SIP or lump sum or both, sit back and watch it grow over a long time.

You might ask, don’t mutual funds need research? Of course, an informed investor should look into the data and prospects. The great thing about mutual funds is that it doesn’t require you to time the market. There are also mutual fund distributors and registered investment advisors who can help you pick suitable MF schemes as per your life goals.

You can also go for index funds that seek to replicate the portfolio of an index like BSE Sensex and NSE Nifty 50. These funds are managed passively because their goal is to track and imitate the performance of a popular stock market index. That’s why the asset allocation of an index fund will be similar to its underlying index.

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