Why mutual fund not stock market.
Some time this question might click in the mind of investors why to choose mutual fund rather than to invest direcly in share market. Yes if you are investor you have both option you can choose mutual fund or share market according to your need. You must know one thing money invested in the mutual fund will ultimately go in the share market. But the difernce is you will not choose the share market on your behalf there are fund manager who will choose stock to be invested. So lets see what are the difference between share market and mutual fund.
- In terms of return.
The very first thing that click in our mind is which can give you more profit. Yes there is no doubt stock market is unbeatable if we talk about profit. Investing direcly in the stock market will definitely give you more profit than mutual fund. There are lot of example in our daily life where people have become millionre from the stock market. You can get more than 100% profit in a single year from share market. If you can choose right share it will definitely gain you a lot of profit. One more thing if we talk about stock market you can get profit when there are bear market i.e. if share market is falling you can take advantage and get huge profit from it. You have lot of option like sort trading, intraday, call, put etc. which will give you profit in the bearish market also.
But if we talk about mutual fund as there are lot of share in a single bucket it is hard to get too much profit like more than 100% in a single year. It is not impossible but we rarely see. Like share market our fund manager don’t have option to book profit in bullish market nor he has any option to gain profit in the falling market. There is no option for intraday trading, sort trading etc like share market. So if market is going up you can get profit but if the market is falling you don’t have any option than wait and watch. Maximum a fund manager can do is shifting the money from one share to another. But if all share are falling than you have to see loss in your portfolio.
- Risk Factor
If we talk about risk there is risk in both share market as well as mutual fund. But as we know if there is profit there will be risk. Same in stock market there is more risk than mutual fund. But if you are good investor know share market better than you can minimize you risk. But in case of mutual fund there used to be very good fund manager hired by finance company where you relly upon them. They work hard for you to give beat result. In share market you have to work very hard to get profit. There are thousand of stock listed in the stock exchange. It is very difficult to study and choose good stock from them. But in mutual fund there are team with fund manager who study those stocks. In stock market if you are beginner and you don’t know market very well you will definetly loose money. Many people think share market is gamble no its not true share market is not gamble you can’t play gamble in share market you will definitely loose. You have to work hard and you can get fruitfull result in share market you can get huge profit which you can’t have imagined from share market. But in mutual fund you have limited profit as well as lower risk than share market. The fund manager diversify your potfolio to lower your risk.
- Tax Benefit.
If we talk about tax benefit. There are same rule in stock and mutual fund to pay tax. For any capital gain in short period you have to pay 15% and for long term capital gain you have to pay 10%. But in case of mutual fund if you are using ELSS fund you can get benefit of tax shaving in 80c.
As I told earlier in case of stock market you have to do lot of research and lot of study so for all these thing you need to have time. You have to spend lot of time. But in case of mutual fund you don’t need to do much thing so you don’t have to spend much time at all.
In case of stock market you need to track your portfolio daily. You have to keep on looking your stock. You have to see each and every movement of the company and along with it other competitor company. Any news or rumour about your invested company can change the stock price in a day.
[catlist name="mutual fund"]