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Fincash » Mutual Fund vs Stock

Mutual Funds Vs Stocks

Updated on July 5, 2020 , 863 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 20 - 21

FundNAVNet Assets (Cr)3 MO (%)6 MO (%)1 YR (%)3 YR (%)5 YR (%)2019 (%)
Franklin India Feeder - Franklin U S Opportunities Fund Growth ₹43.0815
↑ 0.74
₹1,51540.121.533.624.61634.2
DSP BlackRock World Gold Fund Growth ₹19.4801
↑ 0.17
₹46545.130.754.91815.735.1
ICICI Prudential US Bluechip Equity Fund Growth ₹33.32
↑ 0.12
₹58721.22.221.716.713.434.3
Note: Returns up to 1 year are on absolute basis & more than 1 year are on CAGR basis. as on 6 Jul 20

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

1. Franklin India Feeder - Franklin U S Opportunities Fund

The Fund seeks to provide capital appreciation by investing predominantly in units of Franklin U. S. Opportunities Fund, an overseas Franklin Templeton mutual fund, which primarily invests in securities in the United States of America.

Franklin India Feeder - Franklin U S Opportunities Fund is a Equity - Global fund was launched on 6 Feb 12. It is a fund with High risk and has given a CAGR/Annualized return of 19% since its launch.  Ranked 6 in Global category.  Return for 2019 was 34.2% , 2018 was 6.5% and 2017 was 18.1% .

Below is the key information for Franklin India Feeder - Franklin U S Opportunities Fund

Franklin India Feeder - Franklin U S Opportunities Fund
Growth
Launch Date 6 Feb 12
NAV (06 Jul 20) ₹43.0815 ↑ 0.74   (1.74 %)
Net Assets (Cr) ₹1,515 on 30 Apr 20
Category Equity - Global
AMC Franklin Templeton Asst Mgmt(IND)Pvt Ltd
Rating
Risk High
Expense Ratio 1.74
Sharpe Ratio 0.63
Information Ratio -0.1
Alpha Ratio -1.46
Min Investment 5,000
Min SIP Investment 500
Exit Load 0-3 Years (1%),3 Years and above(NIL)

Growth of 10,000 investment over the years.

DateValue
30 Jun 15₹10,000
30 Jun 16₹9,525
30 Jun 17₹10,890
30 Jun 18₹14,061
30 Jun 19₹15,500
30 Jun 20₹20,537

Franklin India Feeder - Franklin U S 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 ₹447,579.
Net Profit of ₹147,579
Invest Now

Returns for Franklin India Feeder - Franklin U S 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 6 Jul 20

DurationReturns
1 Month 5.2%
3 Month 40.1%
6 Month 21.5%
1 Year 33.6%
3 Year 24.6%
5 Year 16%
10 Year
15 Year
Since launch 19%
Historical performance (Yearly) on absolute basis
YearReturns
2019 34.2%
2018 6.5%
2017 18.1%
2016 -0.8%
2015 8.8%
2014 8.4%
2013 55.2%
2012
2011
2010
Fund Manager information for Franklin India Feeder - Franklin U S Opportunities Fund
NameSinceTenure
Pyari Menon26 Sep 190.76 Yr.

Data below for Franklin India Feeder - Franklin U S Opportunities Fund as on 30 Apr 20

Equity Sector Allocation
SectorValue
Technology25.58%
Financial Services16.28%
Health Care15.39%
Consumer Cyclical10.99%
Communication Services7.84%
Real Estate6.44%
Industrials6.37%
Consumer Defensive2.38%
Basic Materials1.32%
Asset Allocation
Asset ClassValue
Cash2.68%
Equity92.86%
Other4.47%
Top Securities Holdings / Portfolio
NameHoldingValueQuantity
Franklin US Opportunities I(acc)USD
Investment Fund | -
100%₹1,689 Cr3,971,177
↑ 69,899
Call, Cash & Other Assets
-, Since 31 May 20 | -
0%₹5 Cr

2. DSP BlackRock World Gold Fund

"The primary investment objective of the Scheme is to seek capital appreciation by investing predominantly in units of MLIIF - WGF. The Scheme may, at the discretion of the Investment Manager, also invest in the units of other similar overseas mutual fund schemes, which may constitute a significant part of its corpus. The Scheme may also invest a certain portion of its corpus in money market securities and/or units of money market/liquid schemes of DSP Merrill Lynch Mutual Fund, in order to meet liquidity requirements from time to time. However, there is no assurance that the investment objective of the Scheme will be realized."

DSP BlackRock World Gold Fund is a Equity - Global fund was launched on 14 Sep 07. It is a fund with High risk and has given a CAGR/Annualized return of 5.3% since its launch.  Ranked 11 in Global category.  Return for 2019 was 35.1% , 2018 was -10.7% and 2017 was -4% .

Below is the key information for DSP BlackRock World Gold Fund

DSP BlackRock World Gold Fund
Growth
Launch Date 14 Sep 07
NAV (06 Jul 20) ₹19.4801 ↑ 0.17   (0.86 %)
Net Assets (Cr) ₹465 on 30 Apr 20
Category Equity - Global
AMC DSP BlackRock Invmt Managers Pvt. Ltd.
Rating
Risk High
Expense Ratio 1.67
Sharpe Ratio 1.19
Information Ratio -1.14
Alpha Ratio -9.76
Min Investment 1,000
Min SIP Investment 500
Exit Load 0-12 Months (1%),12 Months and above(NIL)

Growth of 10,000 investment over the years.

DateValue
30 Jun 15₹10,000
30 Jun 16₹16,113
30 Jun 17₹12,630
30 Jun 18₹11,951
30 Jun 19₹13,529
30 Jun 20₹20,015

DSP BlackRock World Gold 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 DSP BlackRock World Gold Fund

Returns up to 1 year are on absolute basis & more than 1 year are on CAGR (Compound Annual Growth Rate) basis. as on 6 Jul 20

DurationReturns
1 Month 12.2%
3 Month 45.1%
6 Month 30.7%
1 Year 54.9%
3 Year 18%
5 Year 15.7%
10 Year
15 Year
Since launch 5.3%
Historical performance (Yearly) on absolute basis
YearReturns
2019 35.1%
2018 -10.7%
2017 -4%
2016 52.7%
2015 -18.5%
2014 -3%
2013 -41.5%
2012 -5.8%
2011 -2.6%
2010 29%
Fund Manager information for DSP BlackRock World Gold Fund
NameSinceTenure
Jay Kothari1 Mar 137.34 Yr.

Data below for DSP BlackRock World Gold Fund as on 30 Apr 20

Equity Sector Allocation
SectorValue
Basic Materials93.62%
Industrials0.31%
Asset Allocation
Asset ClassValue
Cash4.13%
Equity94.85%
Debt0.02%
Other1%
Top Securities Holdings / Portfolio
NameHoldingValueQuantity
BGF World Gold I2
Investment Fund | -
97%₹486 Cr1,440,008
↑ 2,643
Treps / Reverse Repo Investments / Corporate Debt Repo
CBLO/Reverse Repo | -
6%₹29 Cr
Net Receivables/Payables
Net Current Assets | -
3%-₹14 Cr

3. ICICI Prudential US Bluechip Equity Fund

The investment objective of ICICI Prudential US Bluechip Equity Fund is to provide long term capital appreciation to investors by primarily investing in equity and equity related securities (including ADRs/GDRs issued by Indian and foreign companies) of companies listed on New York Stock Exchange and/or NASDAQ. However, there can be no assurance that the investment objective of the Scheme will be realized.

ICICI Prudential US Bluechip Equity Fund is a Equity - Global fund was launched on 6 Jul 12. It is a fund with High risk and has given a CAGR/Annualized return of 16.2% since its launch.  Ranked 7 in Global category.  Return for 2019 was 34.3% , 2018 was 5.2% and 2017 was 14.1% .

Below is the key information for ICICI Prudential US Bluechip Equity Fund

ICICI Prudential US Bluechip Equity Fund
Growth
Launch Date 6 Jul 12
NAV (06 Jul 20) ₹33.32 ↑ 0.12   (0.36 %)
Net Assets (Cr) ₹587 on 30 Apr 20
Category Equity - Global
AMC ICICI Prudential Asset Management Company Limited
Rating
Risk High
Expense Ratio 2.08
Sharpe Ratio 0.55
Information Ratio 0.13
Alpha Ratio 3.54
Min Investment 5,000
Min SIP Investment 100
Exit Load 0-3 Months (3%),3-12 Months (1%),12 Months and above(NIL)

Growth of 10,000 investment over the years.

DateValue
30 Jun 15₹10,000
30 Jun 16₹10,527
30 Jun 17₹11,889
30 Jun 18₹13,935
30 Jun 19₹15,179
30 Jun 20₹18,464

ICICI Prudential US Bluechip Equity Fund SIP Returns

   
My Monthly Investment:
Investment Tenure:
Years
Expected Annual Returns:
%
Total investment amount is ₹300,000
expected amount after 5 Years is ₹426,080.
Net Profit of ₹126,080
Invest Now

Returns for ICICI Prudential US Bluechip Equity Fund

Returns up to 1 year are on absolute basis & more than 1 year are on CAGR (Compound Annual Growth Rate) basis. as on 6 Jul 20

DurationReturns
1 Month -4.6%
3 Month 21.2%
6 Month 2.2%
1 Year 21.7%
3 Year 16.7%
5 Year 13.4%
10 Year
15 Year
Since launch 16.2%
Historical performance (Yearly) on absolute basis
YearReturns
2019 34.3%
2018 5.2%
2017 14.1%
2016 11.6%
2015 0.7%
2014 12.7%
2013 45.7%
2012
2011
2010
Fund Manager information for ICICI Prudential US Bluechip Equity Fund
NameSinceTenure
Rohan Maru19 Sep 136.79 Yr.
Priyanka Khandelwal30 Jun 173.01 Yr.

Data below for ICICI Prudential US Bluechip Equity Fund as on 30 Apr 20

Equity Sector Allocation
SectorValue
Health Care16.45%
Industrials16.03%
Technology15.36%
Financial Services13.65%
Consumer Cyclical10.66%
Consumer Defensive10.41%
Communication Services7.95%
Basic Materials2.43%
Energy1.22%
Asset Allocation
Asset ClassValue
Cash5.83%
Equity94.17%
Top Securities Holdings / Portfolio
NameHoldingValueQuantity
Treps
CBLO/Reverse Repo | -
6%₹41 Cr
Amazon.com Inc (Consumer Cyclical)
Equity, Since 30 Jun 16 | AMZN
5%₹33 Cr1,763
ServiceNow Inc (Technology)
Equity, Since 30 Sep 19 | NOW
3%₹21 Cr7,102
Raytheon Technologies Corp (Industrials)
Equity, Since 30 Apr 20 | RTX
3%₹20 Cr40,221
Pfizer Inc (Healthcare)
Equity, Since 31 Dec 19 | PFE
3%₹18 Cr62,531
Facebook Inc A (Communication Services)
Equity, Since 31 Jan 18 | FB
3%₹18 Cr10,419
Nike Inc B (Consumer Cyclical)
Equity, Since 30 Jun 19 | NKE
3%₹17 Cr22,351
Merck & Co Inc (Healthcare)
Equity, Since 30 Sep 19 | MRK
3%₹17 Cr27,126
Boeing Co (Industrials)
Equity, Since 31 Mar 20 | BA
3%₹16 Cr14,790
Salesforce.com Inc (Technology)
Equity, Since 31 Dec 18 | CRM
3%₹16 Cr12,340

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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

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