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Fincash » Mutual Fund vs Stock

Mutual Funds Vs Stocks

Updated on October 2, 2022 , 9599 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 22 - 23

FundNAVNet Assets (Cr)3 MO (%)6 MO (%)1 YR (%)3 YR (%)5 YR (%)2021 (%)
TATA Digital India Fund Growth ₹30.5719
↑ 0.68
₹5,9810.8-20.8-17.927.126.274.4
ICICI Prudential Technology Fund Growth ₹129.61
↑ 2.87
₹8,7120.1-20.6-1830.225.975.7
Aditya Birla Sun Life Digital India Fund Growth ₹112.44
↑ 2.59
₹3,1351.9-19.4-16.828.12570.5
Note: Returns up to 1 year are on absolute basis & more than 1 year are on CAGR basis. as on 4 Oct 22

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

1. 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 18% since its launch.  Return for 2021 was 74.4% , 2020 was 54.8% and 2019 was 7.5% .

Below is the key information for TATA Digital India Fund

TATA Digital India Fund
Growth
Launch Date 28 Dec 15
NAV (04 Oct 22) ₹30.5719 ↑ 0.68   (2.29 %)
Net Assets (Cr) ₹5,981 on 31 Aug 22
Category Equity - Sectoral
AMC Tata Asset Management Limited
Rating Not Rated
Risk High
Expense Ratio 1.2
Sharpe Ratio -0.64
Information Ratio 0.62
Alpha Ratio 2.73
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
30 Sep 17₹10,000
30 Sep 18₹16,031
30 Sep 19₹15,678
30 Sep 20₹20,235
30 Sep 21₹38,639
30 Sep 22₹31,422

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 ₹584,107.
Net Profit of ₹284,107
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 4 Oct 22

DurationReturns
1 Month -1%
3 Month 0.8%
6 Month -20.8%
1 Year -17.9%
3 Year 27.1%
5 Year 26.2%
10 Year
15 Year
Since launch 18%
Historical performance (Yearly) on absolute basis
YearReturns
2021 74.4%
2020 54.8%
2019 7.5%
2018 24.9%
2017 19.6%
2016 -6%
2015
2014
2013
2012
Fund Manager information for TATA Digital India Fund
NameSinceTenure
Meeta Shetty9 Mar 211.48 Yr.
Venkat Samala26 Nov 201.76 Yr.

Data below for TATA Digital India Fund as on 31 Aug 22

Equity Sector Allocation
SectorValue
Technology77.66%
Communication Services10.35%
Industrials4.29%
Consumer Cyclical0.93%
Asset Allocation
Asset ClassValue
Cash6.77%
Equity93.23%
Top Securities Holdings / Portfolio
NameHoldingValueQuantity
Infosys Ltd (Technology)
Equity, Since 31 Jan 16 | INFY
26%₹1,532 Cr10,264,598
↑ 300,000
Tata Consultancy Services Ltd (Technology)
Equity, Since 31 Jan 16 | TCS
14%₹836 Cr2,603,873
↑ 325,372
Tech Mahindra Ltd (Technology)
Equity, Since 30 Apr 16 | 532755
9%₹533 Cr4,955,469
↑ 266,135
HCL Technologies Ltd (Technology)
Equity, Since 31 Jan 16 | HCLTECH
8%₹490 Cr5,215,373
↑ 315,000
Bharti Airtel Ltd (Communication Services)
Equity, Since 31 Oct 21 | BHARTIARTL
7%₹426 Cr5,869,200
Wipro Ltd (Technology)
Equity, Since 31 Jul 18 | 507685
3%₹207 Cr5,013,632
↑ 343,300
Larsen & Toubro Infotech Ltd (Technology)
Equity, Since 28 Feb 21 | 540005
3%₹186 Cr400,010
Mphasis Ltd (Technology)
Equity, Since 30 Sep 20 | 526299
2%₹135 Cr632,749
MindTree Ltd (Technology)
Equity, Since 31 Jul 19 | 532819
2%₹131 Cr395,911
Persistent Systems Ltd (Technology)
Equity, Since 31 Jan 16 | PERSISTENT
2%₹116 Cr329,212

2. 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 12% since its launch.  Ranked 37 in Sectoral category.  Return for 2021 was 75.7% , 2020 was 70.6% and 2019 was 2.3% .

Below is the key information for ICICI Prudential Technology Fund

ICICI Prudential Technology Fund
Growth
Launch Date 3 Mar 00
NAV (04 Oct 22) ₹129.61 ↑ 2.87   (2.26 %)
Net Assets (Cr) ₹8,712 on 31 Aug 22
Category Equity - Sectoral
AMC ICICI Prudential Asset Management Company Limited
Rating
Risk High
Expense Ratio 2.07
Sharpe Ratio -0.73
Information Ratio 0.98
Alpha Ratio -5.69
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
30 Sep 17₹10,000
30 Sep 18₹15,142
30 Sep 19₹14,642
30 Sep 20₹19,919
30 Sep 21₹38,698
30 Sep 22₹31,428

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 ₹570,326.
Net Profit of ₹270,326
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 4 Oct 22

DurationReturns
1 Month -0.7%
3 Month 0.1%
6 Month -20.6%
1 Year -18%
3 Year 30.2%
5 Year 25.9%
10 Year
15 Year
Since launch 12%
Historical performance (Yearly) on absolute basis
YearReturns
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%
2012 17.1%
Fund Manager information for ICICI Prudential Technology Fund
NameSinceTenure
Vaibhav Dusad2 May 202.33 Yr.
Sharmila D’mello30 Jun 220.17 Yr.

Data below for ICICI Prudential Technology Fund as on 31 Aug 22

Equity Sector Allocation
SectorValue
Technology76.59%
Communication Services14.26%
Industrials1.92%
Consumer Cyclical0.8%
Energy0.11%
Consumer Defensive0.06%
Asset Allocation
Asset ClassValue
Cash6.25%
Equity93.75%
Top Securities Holdings / Portfolio
NameHoldingValueQuantity
Infosys Ltd (Technology)
Equity, Since 30 Apr 08 | INFY
27%₹2,391 Cr16,012,628
↓ -1,193,507
Tata Consultancy Services Ltd (Technology)
Equity, Since 30 Sep 19 | TCS
13%₹1,126 Cr3,506,783
↑ 618,864
HCL Technologies Ltd (Technology)
Equity, Since 30 Sep 20 | HCLTECH
10%₹868 Cr9,242,203
↑ 605,000
Wipro Ltd (Technology)
Equity, Since 30 Sep 19 | 507685
7%₹643 Cr15,548,325
↑ 1,103,833
Bharti Airtel Ltd (Communication Services)
Equity, Since 31 May 20 | BHARTIARTL
7%₹630 Cr8,665,301
↓ -1,583,830
Tech Mahindra Ltd (Technology)
Equity, Since 31 Oct 16 | 532755
6%₹549 Cr5,101,818
↓ -462,421
Mphasis Ltd (Technology)
Equity, Since 30 Jun 20 | 526299
2%₹132 Cr621,023
↑ 204,324
Zee Entertainment Enterprises Ltd (Communication Services)
Equity, Since 31 Jan 22 | ZEEL
1%₹124 Cr4,820,044
↓ -350,000
MindTree Ltd (Technology)
Equity, Since 30 Jun 20 | 532819
1%₹115 Cr348,363
↑ 59,342
Accenture PLC Class A (Technology)
Equity, Since 28 Feb 21 | ACN
1%₹102 Cr43,600

3. Aditya Birla Sun Life Digital India Fund

(Erstwhile Aditya Birla Sun Life New Millennium Fund)

A multi-sector open-ended growth scheme with the objective of long term growth of capital, through a portfolio with a target allocation of 100% equity, focusing on investing in technology and technology dependent companies, hardware, peripherals and components, software, telecom, media, internet and e-commerce and other technology enabled companies. The secondary objective is income generation and distribution of dividend.

Aditya Birla Sun Life Digital India Fund is a Equity - Sectoral fund was launched on 15 Jan 00. It is a fund with High risk and has given a CAGR/Annualized return of 11.2% since its launch.  Ranked 33 in Sectoral category.  Return for 2021 was 70.5% , 2020 was 59% and 2019 was 9.6% .

Below is the key information for Aditya Birla Sun Life Digital India Fund

Aditya Birla Sun Life Digital India Fund
Growth
Launch Date 15 Jan 00
NAV (04 Oct 22) ₹112.44 ↑ 2.59   (2.36 %)
Net Assets (Cr) ₹3,135 on 31 Aug 22
Category Equity - Sectoral
AMC Birla Sun Life Asset Management Co Ltd
Rating
Risk High
Expense Ratio 2.56
Sharpe Ratio -0.68
Information Ratio 1.05
Alpha Ratio -5.23
Min Investment 1,000
Min SIP Investment 100
Exit Load 0-365 Days (1%),365 Days and above(NIL)

Growth of 10,000 investment over the years.

DateValue
30 Sep 17₹10,000
30 Sep 18₹14,454
30 Sep 19₹14,813
30 Sep 20₹19,467
30 Sep 21₹36,590
30 Sep 22₹30,103

Aditya Birla Sun Life 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 ₹570,326.
Net Profit of ₹270,326
Invest Now

Returns for Aditya Birla Sun Life 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 4 Oct 22

DurationReturns
1 Month -0.6%
3 Month 1.9%
6 Month -19.4%
1 Year -16.8%
3 Year 28.1%
5 Year 25%
10 Year
15 Year
Since launch 11.2%
Historical performance (Yearly) on absolute basis
YearReturns
2021 70.5%
2020 59%
2019 9.6%
2018 15.6%
2017 22.4%
2016 -3.5%
2015 11.2%
2014 21.1%
2013 50.2%
2012 3.7%
Fund Manager information for Aditya Birla Sun Life Digital India Fund
NameSinceTenure
Kunal Sangoi15 Jan 148.63 Yr.

Data below for Aditya Birla Sun Life Digital India Fund as on 31 Aug 22

Equity Sector Allocation
SectorValue
Technology76.06%
Communication Services9.77%
Industrials6.93%
Consumer Cyclical0.76%
Asset Allocation
Asset ClassValue
Cash6.48%
Equity93.52%
Top Securities Holdings / Portfolio
NameHoldingValueQuantity
Infosys Ltd (Technology)
Equity, Since 30 Apr 05 | INFY
24%₹755 Cr5,058,401
Tata Consultancy Services Ltd (Technology)
Equity, Since 30 Apr 05 | TCS
9%₹297 Cr925,450
Tech Mahindra Ltd (Technology)
Equity, Since 31 May 13 | 532755
9%₹276 Cr2,563,833
↑ 230,215
HCL Technologies Ltd (Technology)
Equity, Since 31 Dec 10 | HCLTECH
7%₹227 Cr2,421,227
Bharti Airtel Ltd (Communication Services)
Equity, Since 31 Aug 19 | BHARTIARTL
6%₹199 Cr2,734,997
MindTree Ltd (Technology)
Equity, Since 30 Nov 20 | 532819
4%₹121 Cr365,739
Cyient Ltd (Industrials)
Equity, Since 31 May 14 | CYIENT
3%₹103 Cr1,221,725
Coforge Ltd (Technology)
Equity, Since 30 Jun 20 | 532541
3%₹98 Cr275,281
↑ 20,000
Wipro Ltd (Technology)
Equity, Since 31 Jan 21 | 507685
3%₹82 Cr1,970,817
Mphasis Ltd (Technology)
Equity, Since 29 Feb 20 | 526299
2%₹60 Cr280,854

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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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