Risks and investments go hand in hand. But theres no way to nullify risk in order to get maximum investment returns. The traditional investment methods like fixed deposit and purchasing gold no longer hold good to this generation because the not the returns are low and also the material weight of maintaining those investments are never good for the always on the go millenials.
So the best thing to invest in order to get higher returns is either through buying and maintaining an individual stocks and shares or through mutual funds.
While most people prefer holding direct stocks and shares over mutual funds, increasing number of individuals are coming forward to invest in mutual funds over the recent years.
While many newcomers to the industry might confused on which is the better option, following comparison details help you to understand which method of investment is better suited for your needs.
Mode of operation
Mutual fund: you give your money to financial professionals who invest money in diverse no of stocks and shares to help you get better returns
Stocks and shares: you directly invest your money in the individual stocks and shares after going through the company background and making the decision on your own judgement
Mutual fund: since your money is divided and invested in many companies at any give time, losses in one particular sector wont affect you much in your overall investment returns.
Stocks and shares: most individuals invest in a very few companies making it highly risky in the wake of any market volatality. Since most individuals have limited knowledge on how a market functions compared to an finance professional, there might errors in their judgement.
Stability of returns
Mutual fund: most of the mutual funds ensure the investor get returns on regular interval of time based on the investors preference.
Stocks and shares: these might offer you huge returns, but the risk associated is also huge.
And prices might change in the matter of days.
Mutual funds: they provide a tax benefit of up to rupees one lakh under Section 80C when you invest in an equity-linked savings scheme, which has a lock-in period of three years.
Stocks and shares:in order to trade in stocks and shares you need to have a demat account and you will be required to pay 0.5 to one percent as brokerage along with additional demat charges for buying and selling shares directly.
mutual funds: since the entire operation is handled by professionals you don’t need to worry about every dip and rise in the market, the experts try to minimize your losses and maximise gains to give the best possible returns.
Stocks and shares: you are required to dedicate the time and effort into keeping a daily check on the stock market and the returns you could be expecting on any odd day.
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