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Fincash » Mutual Fund vs Stock

Mutual Funds Vs Stocks

Updated on November 17, 2019 , 296 views

Mutual Funds or stock markets directly – where to invest, is one of the oldest debates when it comes to personal Wealth Management. Mutual funds allow you to invest a certain amount in a fund where the fund managers use their expertise to invest a client’s money in a variety of stocks to achieve the highest rate of return. Investing in stock markets gives you greater control over the investment on shares is made by the user. However, it makes them more prone to risks as they have to directly deal with the markets.

Difference: Mutual Funds Vs Stocks/Shares

1. Understanding Mutual Funds and Stocks

When compared on a risk factor, stocks happen to be far riskier than mutual funds. The risk in mutual funds is spread across and hence reduced with the pooling in of diverse stocks. With stock,s one has to extensive research before investing, especially if you are a novice investor. Visit fincash for more details on the various areas of investments. In the case of mutual funds, the research is done, and the fund is managed by a mutual fund manager.

Stocks Vs Mutual Funds

This service though is not free and comes with an annual management fee that is charged by the fund house under Total Expense Ration (TER).

2. When investing as a beginner

If you are a new investor with little or no experience in the financial markets, it is advisable to start with mutual funds as not only the risk is comparatively lesser but also because the decisions are made by an expert. These professionals have the insight to analyze and interpret financial data to gauge the outlook of a prospective investment.

3. Associated Costs

Though you have to pay a fee to mutual fund managers unlike in the case of stocks that you buy individually, the economies of scale also come into play. It is true that active management of funds is an affair that does not come free of cost. But the truth is that due to their large size, mutual funds pay only a small fraction of the brokerage charges that an individual shareholder pays for brokerage. Individual investors also have to pay the charges for DEMAT which is not needed in the case of mutual funds.

4. Risk and Return

It is already established that mutual funds have the advantage of reducing the risk by diversifying a portfolio.

MF-vs-Stocks

Stocks on the other hand are vulnerable to the market conditions and the performance of one stock can’t compensate for the other.

5. Short Term Capital Gain

Remember when investing in stocks, you will be liable to pay 15 percent tax on your short term capital gains (STCG) if you sell your stocks within a span of one year. On the other hand, there is no tax on capital gains on the stocks that are sold by the fund. This can mean substantial benefits for you. The tax saved is also available for you to invest it further thus making way for further income generation through investment. But you will have to hold on to your equity for more than a year in order to avoid paying that short-term capital gains tax.

6. Long Term Capital Gain

Long Term Capital Gain (LTCG) is taxed at 10% for gains exceeding 1 Lakh gain (As announced in Budget of 2018). which means one has to pay tax on gains incurred in period over an year (Long term) if amount exceeds 1 Lakhs in a year at a flat rate of 10%.

7. Control on your investment

In the case of mutual funds, the decision pertaining to the choice of stocks and their trading is solely in the hands of the funds manager. You do not have control over which stock is to be picked and for what duration. As an investor, if you invest in Mutual Funds you do not have the option to exit from some stocks that are in your portfolio. The decisions pertaining to the fate of the stocks rest in the hands of the fund manager. This way, an individual investing in stocks has more control over their investment than an investor who invests in mutual funds.

8. Diversification

A well-diversified portfolio should include at least 25 to 30 stocks but that would be a huge ask for a small investor. With mutual funds, investors with small funds can also get a diversified portfolio. Buying units of a fund allows you to invest in multiple stocks without having to invest a huge corpus.

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9. Time and Research

When you invest directly, you will need to invest a lot more time and research into your stock while in the case of mutual funds you can be passive. The fund manager is the one who invests his time to manage your portfolio.

10. Investment Tracking

With an investment in mutual funds, you have the benefit of a fund manager who has extensive expertise and experience in the field. Whether it is picking the stocks or monitoring them and making allocations, you do not have to worry about any of it. This service is not available in the case of stock investments. You are responsible for picking and tracking your investment.

11. Investment Horizon

When investing in mutual funds, remember that you will have to give the funds at least 8-10 years to generate good returns as these have a longer-term growth trajectory. In the case of stocks, you can get quick and good returns if you choose the right stocks and sell them at the right time.

Despite all of this if the stock market and its intricacies are something that an individual is familiar with, they can invest directly. They must be ready to play a long term game where a stock doesn’t provide immediate returns and must also have an increased appetite for risk. Unlike investors in mutual funds, they do not have the expertise on Smart investment which fund managers can provide. Even in the best of times, investment in stocks is a risk. In comparatively tougher times, it is better to invest in mutual funds due to the advantage of portfolio diversification, professional management and constant monitoring.

The choice between mutual funds or stocks generally boils down to personal factors like trust and an individual’s ability to take risks. It is a decision to be taken with the utmost of thought with all the options carefully weighed down. However what is important for an individual is the decision to plunge into personal wealth management and attempt to make their savings useful through either mutual funds or stocks, rather than simply sitting on it.

Top Equity MF investments FY 19 - 20

FundNAVNet Assets (Cr)3 MO (%)6 MO (%)1 YR (%)3 YR (%)5 YR (%)2018 (%)
Mirae Asset Emerging Bluechip Fund Growth ₹56.411
↑ 0.09
₹8,8689.69.914.316.516.2-5.4
SBI Small Cap Fund Growth ₹53.5687
↑ 0.03
₹2,91510.88.37.714.315.8-19.6
Aditya Birla Sun Life Banking And Financial Services Fund Growth ₹30.47
↓ -0.02
₹1,888106.816.815.814.7-2.4
Note: Returns up to 1 year are on absolute basis & more than 1 year are on CAGR basis. as on 19 Nov 19

*Below is the list of best mutual funds based on 5 year CAGR/Annualized and AUM > 100 Crore.

1. Mirae Asset Emerging Bluechip Fund

The investment objective of the scheme is to generate income and capital appreciation from a portfolio primarily investing in Indian equities and equity related securities of large cap and mid cap companies at the time of investment. From time to time, the fund manager may also seek participation in other Indian equity and equity related securities to achieve optimal Portfolio construction. The Scheme does not guarantee or assure any returns.

Mirae Asset Emerging Bluechip Fund is a Equity - Large & Mid Cap fund was launched on 9 Jul 10. It is a fund with Moderately High risk and has given a CAGR/Annualized return of 20.3% since its launch.  Return for 2018 was -5.4% , 2017 was 49% and 2016 was 12.2% .

Below is the key information for Mirae Asset Emerging Bluechip Fund

Mirae Asset Emerging Bluechip Fund
Growth
Launch Date 9 Jul 10
NAV (19 Nov 19) ₹56.411 ↑ 0.09   (0.15 %)
Net Assets (Cr) ₹8,868 on 31 Oct 19
Category Equity - Large & Mid Cap
AMC Mirae Asset Global Inv (India) Pvt. Ltd
Rating Not Rated
Risk Moderately High
Expense Ratio 2
Sharpe Ratio 1.05
Information Ratio 1.04
Alpha Ratio 7.64
Min Investment 5,000
Min SIP Investment 1,000
Exit Load 0-1 Years (1%),1 Years and above(NIL)

Growth of 10,000 investment over the years.

DateValue
31 Oct 14₹10,000
31 Oct 15₹11,996
31 Oct 16₹15,171
31 Oct 17₹19,421
31 Oct 18₹18,556
31 Oct 19₹21,730

Mirae Asset Emerging Bluechip Fund SIP Returns

   
My Monthly Investment:
Investment Tenure:
Years
Expected Annual Returns:
%
Total investment amount is ₹300,000
expected amount after 5 Years is ₹458,689.
Net Profit of ₹158,689
Invest Now

Returns for Mirae Asset Emerging Bluechip Fund

Returns up to 1 year are on absolute basis & more than 1 year are on CAGR (Compound Annual Growth Rate) basis. as on 19 Nov 19

DurationReturns
1 Month 4.4%
3 Month 9.6%
6 Month 9.9%
1 Year 14.3%
3 Year 16.5%
5 Year 16.2%
10 Year
15 Year
Since launch 20.3%
Historical performance (Yearly) on absolute basis
YearReturns
2018 -5.4%
2017 49%
2016 12.2%
2015 14.1%
2014 84.6%
2013 8.6%
2012 45.6%
2011 -15.2%
2010
2009
Fund Manager information for Mirae Asset Emerging Bluechip Fund
NameSinceTenure
Neelesh Surana9 Jul 109.15 Yr.
Ankit Jain31 Jan 190.58 Yr.

Data below for Mirae Asset Emerging Bluechip Fund as on 31 Oct 19

Equity Sector Allocation
SectorValue
Financial Services32.47%
Consumer Cyclical12.22%
Health Care11.78%
Basic Materials9.53%
Technology8.64%
Consumer Defensive8.06%
Industrials7.08%
Energy5.4%
Utility3.75%
Asset Allocation
Asset ClassValue
Cash1.07%
Equity98.93%
Other0%
Top Securities Holdings / Portfolio
NameHoldingValueQuantity
HDFC Bank Ltd (Financial Services)
Equity, Since 31 Dec 17 | HDFCBANK
7%₹582 Cr4,740,890
↑ 543,150
ICICI Bank Ltd (Financial Services)
Equity, Since 29 Feb 12 | ICICIBANK
6%₹512 Cr11,800,939
State Bank of India (Financial Services)
Equity, Since 30 Apr 18 | SBIN
4%₹330 Cr12,195,277
↑ 3,158,248
Axis Bank Ltd (Financial Services)
Equity, Since 31 Jul 18 | 532215
4%₹303 Cr4,429,016
Reliance Industries Ltd (Energy)
Equity, Since 30 Apr 18 | RELIANCE
4%₹299 Cr2,243,513
↑ 100,000
Voltas Ltd (Industrials)
Equity, Since 31 Dec 14 | VOLTAS
3%₹266 Cr3,914,449
↓ -100,336
IndusInd Bank Ltd (Financial Services)
Equity, Since 30 Jun 15 | INDUSINDBK
3%₹244 Cr1,761,487
Larsen & Toubro Ltd (Industrials)
Equity, Since 31 Mar 19 | LT
3%₹230 Cr1,560,582
↑ 180,000
Page Industries Ltd (Consumer Cyclical)
Equity, Since 31 Jan 19 | 532827
2%₹201 Cr89,158
Max Financial Services Ltd (Financial Services)
Equity, Since 31 Jan 18 | 500271
2%₹194 Cr4,534,357
↑ 460,211

2. SBI Small Cap Fund

(Erstwhile SBI Small & Midcap Fund)

The Scheme seeks to generate income and long term capital appreciation by investing in a diversified portfolio of predominantly in equity and equity related securities of small & midcap Companies

SBI Small Cap Fund is a Equity - Small Cap fund was launched on 9 Sep 09. It is a fund with Moderately High risk and has given a CAGR/Annualized return of 17.9% since its launch.  Ranked 4 in Small Cap category.  Return for 2018 was -19.6% , 2017 was 78.7% and 2016 was 1.3% .

Below is the key information for SBI Small Cap Fund

SBI Small Cap Fund
Growth
Launch Date 9 Sep 09
NAV (19 Nov 19) ₹53.5687 ↑ 0.03   (0.06 %)
Net Assets (Cr) ₹2,915 on 31 Oct 19
Category Equity - Small Cap
AMC SBI Funds Management Private Limited
Rating
Risk Moderately High
Expense Ratio 2.57
Sharpe Ratio 0.46
Information Ratio 1.34
Alpha Ratio 11.52
Min Investment 5,000
Min SIP Investment 500
Exit Load 0-1 Years (1%),1 Years and above(NIL)

Growth of 10,000 investment over the years.

DateValue
31 Oct 14₹10,000
31 Oct 15₹13,467
31 Oct 16₹16,430
31 Oct 17₹21,951
31 Oct 18₹20,311
31 Oct 19₹22,303

SBI Small Cap Fund SIP Returns

   
My Monthly Investment:
Investment Tenure:
Years
Expected Annual Returns:
%
Total investment amount is ₹300,000
expected amount after 5 Years is ₹447,579.
Net Profit of ₹147,579
Invest Now

Returns for SBI Small Cap Fund

Returns up to 1 year are on absolute basis & more than 1 year are on CAGR (Compound Annual Growth Rate) basis. as on 19 Nov 19

DurationReturns
1 Month 2.5%
3 Month 10.8%
6 Month 8.3%
1 Year 7.7%
3 Year 14.3%
5 Year 15.8%
10 Year
15 Year
Since launch 17.9%
Historical performance (Yearly) on absolute basis
YearReturns
2018 -19.6%
2017 78.7%
2016 1.3%
2015 20.6%
2014 110.7%
2013 7.8%
2012 31.9%
2011 -24.3%
2010 19%
2009
Fund Manager information for SBI Small Cap Fund
NameSinceTenure
R. Srinivasan16 Nov 135.45 Yr.

Data below for SBI Small Cap Fund as on 31 Oct 19

Equity Sector Allocation
SectorValue
Consumer Cyclical22.92%
Industrials22.13%
Basic Materials17.04%
Financial Services11.23%
Consumer Defensive9.12%
Technology4.05%
Utility2.26%
Health Care1.67%
Real Estate0.91%
Asset Allocation
Asset ClassValue
Cash8.13%
Equity91.87%
Top Securities Holdings / Portfolio
NameHoldingValueQuantity
Treps
CBLO/Reverse Repo | -
7%₹190 Cr
Axis Bank Ltd (Financial Services)
Equity, Since 30 Sep 19 | 532215
5%₹137 Cr2,000,000
↑ 2,000,000
Hawkins Cookers Ltd (Consumer Cyclical)
Equity, Since 30 Jun 15 | 508486
4%₹117 Cr352,000
JK Cement Ltd (Basic Materials)
Equity, Since 31 Oct 18 | JKCEMENT
4%₹113 Cr1,077,439
Dixon Technologies (India) Ltd (Technology)
Equity, Since 31 Aug 18 | 540699
4%₹109 Cr377,000
Relaxo Footwears Ltd (Consumer Cyclical)
Equity, Since 30 Nov 13 | 530517
3%₹91 Cr1,800,000
Tube Investments of India Ltd Ordinary Shares (Consumer Cyclical)
Equity, Since 31 Jan 19 | 540762
3%₹88 Cr2,300,000
↑ 624,864
NIIT Ltd (Consumer Defensive)
Equity, Since 30 Apr 19 | 500304
3%₹86 Cr9,452,213
↑ 2,452,213
Techno Electric & Engineering Co Ltd (Industrials)
Equity, Since 31 Dec 18 | 542141
3%₹83 Cr3,134,750
Blue Star Ltd (Industrials)
Equity, Since 30 Jun 18 | BLUESTARCO
3%₹80 Cr1,000,000
↑ 213,475

3. Aditya Birla Sun Life Banking And Financial Services Fund

The primary investment objective of the Scheme is to generate long-term capital appreciation to unit holders from a portfolio that is invested predominantly in equity and equity related securities of companies engaged in banking and financial services. The Scheme does not guarantee/indicate any returns. There can be no assurance that the schemes’ objectives will be achieved.

Aditya Birla Sun Life Banking And Financial Services Fund is a Equity - Sectoral fund was launched on 14 Dec 13. It is a fund with High risk and has given a CAGR/Annualized return of 20.7% since its launch.  Ranked 3 in Sectoral category.  Return for 2018 was -2.4% , 2017 was 47.6% and 2016 was 15.7% .

Below is the key information for Aditya Birla Sun Life Banking And Financial Services Fund

Aditya Birla Sun Life Banking And Financial Services Fund
Growth
Launch Date 14 Dec 13
NAV (19 Nov 19) ₹30.47 ↓ -0.02   (-0.07 %)
Net Assets (Cr) ₹1,888 on 31 Oct 19
Category Equity - Sectoral
AMC Birla Sun Life Asset Management Co Ltd
Rating
Risk High
Expense Ratio 2.35
Sharpe Ratio 0.8
Information Ratio -1.01
Alpha Ratio -9.03
Min Investment 1,000
Min SIP Investment 1,000
Exit Load 0-365 Days (1%),365 Days and above(NIL)

Growth of 10,000 investment over the years.

DateValue
31 Oct 14₹10,000
31 Oct 15₹10,958
31 Oct 16₹14,963
31 Oct 17₹18,651
31 Oct 18₹16,797
31 Oct 19₹20,061

Aditya Birla Sun Life Banking And Financial Services Fund SIP Returns

   
My Monthly Investment:
Investment Tenure:
Years
Expected Annual Returns:
%
Total investment amount is ₹300,000
expected amount after 5 Years is ₹436,710.
Net Profit of ₹136,710
Invest Now

Returns for Aditya Birla Sun Life Banking And Financial Services Fund

Returns up to 1 year are on absolute basis & more than 1 year are on CAGR (Compound Annual Growth Rate) basis. as on 19 Nov 19

DurationReturns
1 Month 5.7%
3 Month 10%
6 Month 6.8%
1 Year 16.8%
3 Year 15.8%
5 Year 14.7%
10 Year
15 Year
Since launch 20.7%
Historical performance (Yearly) on absolute basis
YearReturns
2018 -2.4%
2017 47.6%
2016 15.7%
2015 -0.5%
2014 65.8%
2013
2012
2011
2010
2009
Fund Manager information for Aditya Birla Sun Life Banking And Financial Services Fund
NameSinceTenure
Satyabrata Mohanty14 Dec 135.13 Yr.
Dhaval Gala26 Aug 153.44 Yr.

Data below for Aditya Birla Sun Life Banking And Financial Services Fund as on 31 Oct 19

Equity Sector Allocation
SectorValue
Financial Services97.2%
Asset Allocation
Asset ClassValue
Cash1.72%
Equity97.2%
Other1.08%
Top Securities Holdings / Portfolio
NameHoldingValueQuantity
HDFC Bank Ltd (Financial Services)
Equity, Since 31 Dec 13 | HDFCBANK
16%₹293 Cr2,383,400
↓ -158,600
ICICI Bank Ltd (Financial Services)
Equity, Since 31 Dec 13 | ICICIBANK
12%₹235 Cr5,080,190
↑ 110,000
Bajaj Finance Ltd (Financial Services)
Equity, Since 30 Sep 16 | 500034
7%₹140 Cr347,931
Axis Bank Ltd (Financial Services)
Equity, Since 31 Oct 18 | 532215
7%₹132 Cr1,790,739
ICICI Lombard General Insurance Co Ltd (Financial Services)
Equity, Since 30 Sep 19 | 540716
6%₹123 Cr914,027
↑ 239,600
Bandhan Bank Ltd (Financial Services)
Equity, Since 30 Apr 18 | 541153
6%₹114 Cr1,869,288
↓ -314,612
Kotak Mahindra Bank Ltd (Financial Services)
Equity, Since 31 Jan 19 | KOTAKBANK
5%₹103 Cr652,830
State Bank of India (Financial Services)
Equity, Since 31 Oct 17 | SBIN
4%₹85 Cr2,709,080
IndusInd Bank Ltd (Financial Services)
Equity, Since 31 Dec 13 | INDUSINDBK
4%₹83 Cr631,373
Bajaj Finserv Ltd (Financial Services)
Equity, Since 30 Nov 15 | 532978
4%₹79 Cr97,200

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Disclaimer:
All efforts have been made to ensure the information provided here is accurate. However, no guarantees are made regarding correctness of data. Please verify with scheme information document before making any investment.
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GAURAV, posted on 3 Dec 18 5:08 AM

Clarified my doubts

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