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Fincash » Mutual Fund vs Stock

Mutual Funds Vs Stocks

Updated on March 29, 2023 , 11429 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 23 - 24

FundNAVNet Assets (Cr)3 MO (%)6 MO (%)1 YR (%)3 YR (%)5 YR (%)2022 (%)
ICICI Prudential Technology Fund Growth ₹132.02
↑ 2.80
₹8,993-1.13.4-18.84121.1-23.2
TATA Digital India Fund Growth ₹31.373
↑ 0.65
₹6,7660.24.2-18.335.920.9-23.3
SBI Technology Opportunities Fund Growth ₹138.966
↑ 2.66
₹2,8620.17.8-10.835.220.3-15.5
Note: Returns up to 1 year are on absolute basis & more than 1 year are on CAGR basis. as on 31 Mar 23

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

1. ICICI Prudential Technology Fund

To generate long-term capital appreciation for you from a portfolio made up predominantly of equity and equity-related securities of technology intensive companies.

ICICI Prudential Technology Fund is a Equity - Sectoral fund was launched on 3 Mar 00. It is a fund with High risk and has given a CAGR/Annualized return of 11.8% since its launch.  Ranked 37 in Sectoral category.  Return for 2022 was -23.2% , 2021 was 75.7% and 2020 was 70.6% .

Below is the key information for ICICI Prudential Technology Fund

ICICI Prudential Technology Fund
Growth
Launch Date 3 Mar 00
NAV (31 Mar 23) ₹132.02 ↑ 2.80   (2.17 %)
Net Assets (Cr) ₹8,993 on 28 Feb 23
Category Equity - Sectoral
AMC ICICI Prudential Asset Management Company Limited
Rating
Risk High
Expense Ratio 2.07
Sharpe Ratio -0.77
Information Ratio 1.11
Alpha Ratio -3.44
Min Investment 5,000
Min SIP Investment 100
Exit Load 0-1 Years (1%),1 Years and above(NIL)

Growth of 10,000 investment over the years.

DateValue
31 Mar 18₹10,000
31 Mar 19₹11,768
31 Mar 20₹9,297
31 Mar 21₹21,561
31 Mar 22₹32,126
31 Mar 23₹26,086

ICICI Prudential Technology Fund SIP Returns

   
My Monthly Investment:
Investment Tenure:
Years
Expected Annual Returns:
%
Total investment amount is ₹300,000
expected amount after 5 Years is ₹518,033.
Net Profit of ₹218,033
Invest Now

Returns for ICICI Prudential Technology Fund

Returns up to 1 year are on absolute basis & more than 1 year are on CAGR (Compound Annual Growth Rate) basis. as on 31 Mar 23

DurationReturns
1 Month -2%
3 Month -1.1%
6 Month 3.4%
1 Year -18.8%
3 Year 41%
5 Year 21.1%
10 Year
15 Year
Since launch 11.8%
Historical performance (Yearly) on absolute basis
YearReturns
2022 -23.2%
2021 75.7%
2020 70.6%
2019 2.3%
2018 19.1%
2017 19.8%
2016 -4%
2015 3.9%
2014 26.3%
2013 62.6%
Fund Manager information for ICICI Prudential Technology Fund
NameSinceTenure
Vaibhav Dusad2 May 202.83 Yr.
Sharmila D’mello30 Jun 220.67 Yr.

Data below for ICICI Prudential Technology Fund as on 28 Feb 23

Equity Sector Allocation
SectorValue
Technology79.55%
Communication Services14.37%
Industrials2.44%
Consumer Cyclical1.4%
Energy0.5%
Consumer Defensive0.16%
Financial Services0%
Asset Allocation
Asset ClassValue
Cash1.57%
Equity98.43%
Top Securities Holdings / Portfolio
NameHoldingValueQuantity
Infosys Ltd (Technology)
Equity, Since 30 Apr 08 | INFY
32%₹2,845 Cr19,122,835
↓ -1,057,513
Tata Consultancy Services Ltd (Technology)
Equity, Since 30 Sep 19 | TCS
18%₹1,653 Cr4,989,650
↑ 91,102
Bharti Airtel Ltd (Communication Services)
Equity, Since 31 May 20 | BHARTIARTL
8%₹725 Cr9,770,433
↑ 404,709
HCL Technologies Ltd (Technology)
Equity, Since 30 Sep 20 | HCLTECH
8%₹690 Cr6,406,158
↑ 924,796
Tech Mahindra Ltd (Technology)
Equity, Since 31 Oct 16 | 532755
6%₹557 Cr5,062,315
↑ 2,003,665
Wipro Ltd (Technology)
Equity, Since 30 Sep 19 | 507685
4%₹364 Cr9,400,348
↓ -1,793,463
LTIMindtree Ltd (Technology)
Equity, Since 31 Jul 16 | LTIM
2%₹164 Cr347,476
↓ -40,000
Zee Entertainment Enterprises Ltd (Communication Services)
Equity, Since 31 Jan 22 | ZEEL
1%₹127 Cr6,499,104
↑ 102,401
Cognizant Technology Solutions Corp Class A (Technology)
Equity, Since 31 Jul 21 | CTSH
1%₹107 Cr203,668
91 DTB 18052023
Sovereign Bonds | -
1%₹99 Cr10,000,000
↑ 10,000,000

2. TATA Digital India Fund

The investment objective of the scheme is to seek long term capital appreciation by investing atleast 80% of its net assets in equity/equity related instruments of the companies in Information Technology Sector in India.However, there is no assurance or guarantee that the investment objective of the Scheme will be achieved.The Scheme does not assure or guarantee any returns.

TATA Digital India Fund is a Equity - Sectoral fund was launched on 28 Dec 15. It is a fund with High risk and has given a CAGR/Annualized return of 17.1% since its launch.  Return for 2022 was -23.3% , 2021 was 74.4% and 2020 was 54.8% .

Below is the key information for TATA Digital India Fund

TATA Digital India Fund
Growth
Launch Date 28 Dec 15
NAV (31 Mar 23) ₹31.373 ↑ 0.65   (2.12 %)
Net Assets (Cr) ₹6,766 on 28 Feb 23
Category Equity - Sectoral
AMC Tata Asset Management Limited
Rating Not Rated
Risk High
Expense Ratio 0
Sharpe Ratio -0.75
Information Ratio 0.31
Alpha Ratio -2.86
Min Investment 5,000
Min SIP Investment 150
Exit Load 0-3 Months (0.25%),3 Months and above(NIL)

Growth of 10,000 investment over the years.

DateValue
31 Mar 18₹10,000
31 Mar 19₹12,360
31 Mar 20₹10,310
31 Mar 21₹21,403
31 Mar 22₹31,636
31 Mar 23₹25,860

TATA Digital India Fund SIP Returns

   
My Monthly Investment:
Investment Tenure:
Years
Expected Annual Returns:
%
Total investment amount is ₹300,000
expected amount after 5 Years is ₹505,644.
Net Profit of ₹205,644
Invest Now

Returns for TATA Digital India Fund

Returns up to 1 year are on absolute basis & more than 1 year are on CAGR (Compound Annual Growth Rate) basis. as on 31 Mar 23

DurationReturns
1 Month -1.6%
3 Month 0.2%
6 Month 4.2%
1 Year -18.3%
3 Year 35.9%
5 Year 20.9%
10 Year
15 Year
Since launch 17.1%
Historical performance (Yearly) on absolute basis
YearReturns
2022 -23.3%
2021 74.4%
2020 54.8%
2019 7.5%
2018 24.9%
2017 19.6%
2016 -6%
2015
2014
2013
Fund Manager information for TATA Digital India Fund
NameSinceTenure
Meeta Shetty9 Mar 211.98 Yr.
Venkat Samala26 Nov 202.26 Yr.

Data below for TATA Digital India Fund as on 28 Feb 23

Equity Sector Allocation
SectorValue
Technology80.92%
Communication Services10.57%
Industrials4.12%
Consumer Cyclical1.6%
Financial Services0.63%
Health Care0.1%
Consumer Defensive0.09%
Utility0.02%
Energy0.01%
Real Estate0%
Asset Allocation
Asset ClassValue
Cash1.93%
Equity98.07%
Top Securities Holdings / Portfolio
NameHoldingValueQuantity
Infosys Ltd (Technology)
Equity, Since 31 Jan 16 | INFY
25%₹1,664 Cr11,184,598
Tata Consultancy Services Ltd (Technology)
Equity, Since 31 Jan 16 | TCS
19%₹1,293 Cr3,903,371
HCL Technologies Ltd (Technology)
Equity, Since 31 Jan 16 | HCLTECH
9%₹580 Cr5,383,886
LTIMindtree Ltd (Technology)
Equity, Since 28 Feb 21 | LTIM
8%₹570 Cr1,208,062
↑ 183,000
Bharti Airtel Ltd (Communication Services)
Equity, Since 31 Oct 21 | BHARTIARTL
7%₹506 Cr6,819,200
Tech Mahindra Ltd (Technology)
Equity, Since 30 Apr 16 | 532755
6%₹387 Cr3,515,094
↑ 1,320,000
Wipro Ltd (Technology)
Equity, Since 31 Jul 18 | 507685
2%₹155 Cr4,013,632
Persistent Systems Ltd (Technology)
Equity, Since 31 Jan 16 | PERSISTENT
2%₹136 Cr282,812
↑ 3,600
Cyient Ltd (Industrials)
Equity, Since 28 Feb 21 | CYIENT
2%₹119 Cr1,259,737
Coforge Ltd (Technology)
Equity, Since 28 Feb 23 | COFORGE
2%₹106 Cr247,000
↑ 247,000

3. SBI Technology Opportunities Fund

(Erstwhile SBI IT Fund)

To provide the investors maximum growth opportunity through equity investments in stocks of growth oriented sectors of the economy.

SBI Technology Opportunities Fund is a Equity - Sectoral fund was launched on 9 Jan 13. It is a fund with High risk and has given a CAGR/Annualized return of 19.3% since its launch.  Ranked 42 in Sectoral category.  Return for 2022 was -15.5% , 2021 was 66.4% and 2020 was 47.3% .

Below is the key information for SBI Technology Opportunities Fund

SBI Technology Opportunities Fund
Growth
Launch Date 9 Jan 13
NAV (31 Mar 23) ₹138.966 ↑ 2.66   (1.95 %)
Net Assets (Cr) ₹2,862 on 28 Feb 23
Category Equity - Sectoral
AMC SBI Funds Management Private Limited
Rating
Risk High
Expense Ratio 2.26
Sharpe Ratio -0.3
Information Ratio 0.88
Alpha Ratio 5.48
Min Investment 5,000
Min SIP Investment 500
Exit Load 0-15 Days (0.5%),15 Days and above(NIL)

Growth of 10,000 investment over the years.

DateValue
31 Mar 18₹10,000
31 Mar 19₹11,719
31 Mar 20₹10,196
31 Mar 21₹19,530
31 Mar 22₹28,224
31 Mar 23₹25,170

SBI Technology Opportunities Fund SIP Returns

   
My Monthly Investment:
Investment Tenure:
Years
Expected Annual Returns:
%
Total investment amount is ₹300,000
expected amount after 5 Years is ₹505,644.
Net Profit of ₹205,644
Invest Now

Returns for SBI Technology Opportunities Fund

Returns up to 1 year are on absolute basis & more than 1 year are on CAGR (Compound Annual Growth Rate) basis. as on 31 Mar 23

DurationReturns
1 Month -2.3%
3 Month 0.1%
6 Month 7.8%
1 Year -10.8%
3 Year 35.2%
5 Year 20.3%
10 Year
15 Year
Since launch 19.3%
Historical performance (Yearly) on absolute basis
YearReturns
2022 -15.5%
2021 66.4%
2020 47.3%
2019 12.2%
2018 17.1%
2017 13%
2016 -3.3%
2015 2.4%
2014 29.2%
2013
Fund Manager information for SBI Technology Opportunities Fund
NameSinceTenure
Saurabh Pant1 Jan 221.16 Yr.
Mohit Jain1 Jan 221.16 Yr.

Data below for SBI Technology Opportunities Fund as on 28 Feb 23

Equity Sector Allocation
SectorValue
Technology66.17%
Communication Services15.06%
Consumer Cyclical4.28%
Industrials2.42%
Asset Allocation
Asset ClassValue
Cash12.07%
Equity87.93%
Top Securities Holdings / Portfolio
NameHoldingValueQuantity
Infosys Ltd (Technology)
Equity, Since 31 Jan 03 | INFY
27%₹774 Cr5,200,000
Tata Consultancy Services Ltd (Technology)
Equity, Since 30 Apr 06 | TCS
15%₹424 Cr1,280,000
↑ 180,000
Bharti Airtel Ltd (Communication Services)
Equity, Since 31 May 18 | BHARTIARTL
9%₹260 Cr3,500,000
HCL Technologies Ltd (Technology)
Equity, Since 31 Mar 06 | HCLTECH
6%₹183 Cr1,700,000
Tech Mahindra Ltd (Technology)
Equity, Since 31 May 22 | 532755
5%₹141 Cr1,280,000
↑ 450,000
Wipro Ltd (Technology)
Equity, Since 30 Apr 21 | 507685
4%₹119 Cr3,080,000
Netflix Inc (Communication Services)
Equity, Since 31 Aug 21 | NFLX
4%₹101 Cr38,000
↓ -9,000
Persistent Systems Ltd (Technology)
Equity, Since 31 Jul 22 | PERSISTENT
3%₹96 Cr200,000
Microsoft Corp (Technology)
Equity, Since 31 Aug 20 | MSFT
3%₹79 Cr38,000
PVR Ltd (Communication Services)
Equity, Since 31 Jan 22 | PVR
2%₹70 Cr459,692

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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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