whether mutual funds are better option for investment than shares& stock? & why give reasons?

Answer 1

mutual funds are better because they are safer, you can generate much higher returns through shares and stocks, but for that you need to be an expert. Mutual fund companies have expert fund managers who break up our investments in smaller potrtions. These smaller portions are then added up with smaller portions of other investers, say if your investment was broken into A,B,C,D etc, and someone elses as a,b,c,d etc, the fund manager would then co agulate all the aA and bB and cC .... and then invest these into many market options like shares and stocks. This way your money is managed by an expert and since it is put in many company shares, even if the expert fails in one, there are chances that he will succeed in many others, thus HEDGING your losses. Mutual Funds also give you flexibility in payment modes like SIP's (systematic investment) and also have features like ELSS , where if you opt for a lock in period of say about 3 years, you also get tax benifits.

Answer 2

mutual funds do not have to be a better investment than individual shares. For example if you had bought Microsoft back in, say, 1990, you'd have done much better than with most mutual funds!

however the nice thing about mutual funds is that they're diversified, and if well managed, will get you decent returns, over extended periods of time. And since they're managed by someone who tries to pick the best stocks, you save yourself a lot of time thinking about which stocks you should own in your portfolio.

another factor is how much you pay extra for all this. A fund will typically have a fee when you enter, and then a yearly management fee, and the lower it is, the better of course. As for trading shares, it varies a lot but often you will pay hefty fees, either explicitly, or implicitly because the broker will take a hefty margin between the share price on the general market, and the price you are able to get.

hope this helps

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Answer 3

It all depends. For many people indeed mutual funds are a better option. Find five good mutual funds, put your money in them and once a year check up on them and make sure they are performing to your expectations and that is all there is to it. But there are definitely several disadvantages to doing this.

1. You are paying a management fee to someone to invest for you.

2. 70% of mutual funds under perform the market averages

3. most mutual funds are tax inefficient.

To remedy many of these problems ETF index funds have recently been maketed.

For people willing to invest the time and aquire the knowledge, investing directly in companies is perhaps a better option. Find good companies, invest your money and watch it grow.

no management fee

no taxes on capital gains unless you sell your shares

The main problem is that people can not resist speculation. They love "hot tips". They love to sell their shares when they have gone up 10 points. They can not resist jumping into the market at market tops and dumping everything at market bottoms.

Answer 4

If u r going to lose money, u'll lose in both the options. Personally I feel u must read, study a lot about the companies (select a few for starters). study the financials and backgrounds of these companies. Try comparing notes with few like minded investors. This is better way to invest in shares. Mutual fund people do all this and get paid by the small investors who give them money to invest in the shares. So why not try urself. May be it will prove fruitful to you.

Answer 5

it depends on your risk taking capabilities. if u have the heart to take high risk with your investment i would definately sujjust that u invest in shares. because share any day will give u more return then any mutual fund.but on the flip side investing in share is very risking and also u have to keep track of your investment mostly every day if u are a short term investor.in case of mutual fund u have trained managers who look after your investment and also in mutual fund your investment is safe gaurded agaisnt any fluctuation in the stock market because when u are investing in a mutual fund your investment is spread over number of stock.if u are investing in the stock market for the first time then i would sugest that u invest in the mutual fund first and see how the market works

Answer 6

If your risk taking capacity is not very high then you should invest in mutual funds. If you can have good knowledge of how stock market works and can take considerable amount of risk then only you should invest in share market. My order of preference would be 1) Mutual Funds. 2) Share Market. 3) Fixed Deposit.

Answer 7

If you are serious in investment activity, I think you should take some time out to look after your own investments on regular basis (not if daily, weekly basis) and invest in well researched stocks and shares and definitely avoid mutual funds.

Since the markets are bullish these days, all sorts of MFs are making noises. Let the market shake a little bit for some long stretch, they would be the first to disappear or go underground. Interestingly, even MFs invest in the same shares and stocks as available to common man, they don't get something different. A report mentioned that the overheads of MFs eat away our profits and even investments to the extent of over 200% in a span of 10 years - and yet no accountability - as they make you sign before hand that your investments are subject to market risks, and these tricks and knowledge a non-qualified and one time market illiterate investor like Rakesh Jhunjhunwala has understood so well in a span of a few years and making a killing now. On the other hand, an internationally reputed MF Morgan Stanley could not bring their IPO shares above par in India for more than 10 years - where were their international acclaimed experts. These are just one example each side.

A far below average (in finances and investments) school friend of mine whom I prompted to invest his small savings in share market and manage them himself has been making killing (even when there was sharp decline recently) and offering me lessons in share market. It is the taste - which once you have it, like it, master it - nothing else is required.

And tell me who else can take better care of your money than you yourself!! Just a little attention and analysis of market information (which is easily available on websites these days) is what it is required for oneself.

Answer 8

SIP in Mutual Fund is certainly a better option. To make money in stock market, you need to invest your time. Literally, you will be there mentally all the time. But if you invest through a MF, it is the fund managers who are mentally their applying tgheir brains to make money for you. You do not pay ant transaction tax etc., pay only a small entry load or exit load for MF investment.

Answer 9

You get immediate diversification and you hire someone to "manage" your money. Mutual Funds are designed to meet certain objectives. Say you are a growth investor then buy a growth fund who is consistently in the top of its category (The Growth Fund of America).
Do not case returns take consistency.

Answer 10

For a beginner, surely mutual fund. There are several reasons, but I suggest you look up www.valueresearchonline.com, they will tell you exactly why. Once you learn a bit, venture out into stocks by yourself.