1. While patience is the key when investing in any equity product, for equity shares we also need conviction towards stock market and devote adequate time to research companies and sectors.
2. An oft-heard argument is that if SIPs can work in MFs, then a systematic investment in direct equity should work even better, as stocks can even earn multi-bagger returns which few equity funds can deliver.
3. MF SIPs, by nature, are designed to put your investment on auto pilot which may work reasonably well as the fund manager takes care of your portfolio, but when you systematically invest in stocks directly, very close monitoring is essential as no stock is a perpetual 'buy' at any price, and you can also end up owning too much of an individual stock or sector in your portfolio.
4. MFs have a professionally managed portfolio, where individual stocks can keep changing at different market levels based on the options available, but with direct investment in stocks, it would be up to you to ensure that they are good acquisitions over time by keeping a close watch on both the company's performance and the sector's to ensure that accumulating it remains a good idea.
5. Only equity investors having a strong stomach will be able to do this while others will panic and sell their holdings whenever there's a downtrend, hence the ability to withstand volatility by holding on to well-researched stocks for long term is more important than stock-picking skills.
6. Therefore, first-time investors in equity should not treat it as a source of excitement, as investing is not a gamble but a serious investment opportunity, and equity MFs are ideal starting point by leaving stock-picking to a professional fund manager rather than doing so on one’s own.
7. Investing in stocks is also different to fund investment in the sense that here selling them becomes an art, as there's no point saying you have made a profit until you sell too, because at the end of the day, it’s cash in the bank that counts as wealth, not the daily marked-to-market profits in your stock portfolio.
8. On the other hand, equity mutual funds invest in equity shares themselves, through a structured portfolio created by a systematic process and managed by an expert, offering investors diversification benefits, even with small investments, to suit their income and growth needs, without incurring taxes when buying and selling stocks because you haven't made transactions yourselves, and the tax saved stays as an investment and multiplies in the long-term, besides expertise in portfolio rebalancing during economic and market triggers, which direct equity investors usually lack.
9. A MF investor doesn't even require to open a demat account and spend monthly maintenance charges on it (except for ETFs) like a stock investor, while a minor cannot be a joint holder of a demat account, but can be a joint holder of a mutual fund account.
10. Also, a MF investor pays STT only upon redemption of his units, while a stock investor incurs STT both during buying and selling of his shares.
2. An oft-heard argument is that if SIPs can work in MFs, then a systematic investment in direct equity should work even better, as stocks can even earn multi-bagger returns which few equity funds can deliver.
3. MF SIPs, by nature, are designed to put your investment on auto pilot which may work reasonably well as the fund manager takes care of your portfolio, but when you systematically invest in stocks directly, very close monitoring is essential as no stock is a perpetual 'buy' at any price, and you can also end up owning too much of an individual stock or sector in your portfolio.
4. MFs have a professionally managed portfolio, where individual stocks can keep changing at different market levels based on the options available, but with direct investment in stocks, it would be up to you to ensure that they are good acquisitions over time by keeping a close watch on both the company's performance and the sector's to ensure that accumulating it remains a good idea.
5. Only equity investors having a strong stomach will be able to do this while others will panic and sell their holdings whenever there's a downtrend, hence the ability to withstand volatility by holding on to well-researched stocks for long term is more important than stock-picking skills.
6. Therefore, first-time investors in equity should not treat it as a source of excitement, as investing is not a gamble but a serious investment opportunity, and equity MFs are ideal starting point by leaving stock-picking to a professional fund manager rather than doing so on one’s own.
7. Investing in stocks is also different to fund investment in the sense that here selling them becomes an art, as there's no point saying you have made a profit until you sell too, because at the end of the day, it’s cash in the bank that counts as wealth, not the daily marked-to-market profits in your stock portfolio.
8. On the other hand, equity mutual funds invest in equity shares themselves, through a structured portfolio created by a systematic process and managed by an expert, offering investors diversification benefits, even with small investments, to suit their income and growth needs, without incurring taxes when buying and selling stocks because you haven't made transactions yourselves, and the tax saved stays as an investment and multiplies in the long-term, besides expertise in portfolio rebalancing during economic and market triggers, which direct equity investors usually lack.
9. A MF investor doesn't even require to open a demat account and spend monthly maintenance charges on it (except for ETFs) like a stock investor, while a minor cannot be a joint holder of a demat account, but can be a joint holder of a mutual fund account.
10. Also, a MF investor pays STT only upon redemption of his units, while a stock investor incurs STT both during buying and selling of his shares.