When you plan to invest your money, you get a lot of advice from various ‘experts’. These experts may not be investors themselves, but they will gladly render invaluable advice to you. For a beginner, a question always boggles the mind. Should I invest in stocks or mutual funds? If you are confused between the two, we have devised a complete guide that clears your doubts. You don’t need to rely on baseless advice when you have professional guidance with you. After reading this post, you will be able to invest wisely, whether its stocks or mutual funds.

Investing in Stock Market

Playing in the stock market is engaging as well as risky. Before investing in stocks, you should know that the volatility can be high and returns can also fluctuate considerably. If you plan to invest in stocks, you should possess expert knowledge. Because you can lose a lot of money if you play like an amateur. To gain knowledge, you should get familiar with the basic fundamentals, the functioning of the stock market, government policies, and so on. You should analyze the stock market both in the short term and the long term.

When you invest in stocks, you should not keep all eggs in one basket. This means that you should diversify your funds. In case the stock market comes down in one sector, the investment will be secured in other sectors. Thus, it becomes crucial to analyze stock market on a daily basis. Further, keep yourself updated with the latest news and development. If the stock market seems bearish, you can wait for a long-term to witness impressive gains.

When investing in stock markets, you should focus on liquidity as well. For example, if you invested all your money in stock market and at the time when the stock market is at its peak, it might become difficult to sell your stocks. This will create liquidity crunch. Thus, always purchase as per your financial capacity.

Investing in Mutual Funds

For novice investors who don’t have knowledge about stocks, mutual funds are the best option. While you plan to buy mutual funds online, you don’t have to dive deeper into financial terms. You just need to analyze certain aspects such as past performance, fund manager, assets under management, and so on. Your investments will be handled by professionals known as fund managers. These experts have prior experience of dealing in the stocks. They will ensure you get steady returns without incurring heavy expenses. They charge total expenses in the range of 1-2.5%.

Mutual funds have various options for the investors. If you have an appetite for risk, you can choose equity funds like small-cap, mid-cap, and large-cap funds, diversified funds, sectoral funds, and so on. And if you want to play safe, check out the list of debt mutual funds and money market mutual funds. Further, you can also opt for tax saving schemes such as equity-linked saving schemes (ELSS) with tax benefit up to Rs 1.5 lakh per annum.

In addition to these, mutual funds are open for systematic investment plans (SIPs) wherein you invest a small sum at periodic time intervals. You can opt for a lump sum investment as well.

The Final Verdict

We can say that if you plan to make it big and have a risk appetite, you should go for stocks. But yes, you should have appropriate knowledge and a firm understanding of the stock market.

If you want to fulfill your financial goals without getting involved with the task of analyzing the market, you can consider mutual funds. Further, you can plan to invest via SIPs or a lump sum amount.