INSUBCONTINENT EXCLUSIVE:
New investors are advised to begin with mutual funds to get acquainted with the marketMost people are curious about the investment options
available to them and want to learn more to enable themselves to save taxes
Those planning to invest for the first time want an easy answer on what to pick: mutual funds or stocks? To simply say that one is better
than the other would be a generic statement
Every person has unique requirements and these two investment instruments offer distinct benefits.Also, mutual funds and stocks are crafted
Let's compare them so you can decide what's the best option for you.Understanding stocks and mutual fundsStocks happen to be far riskier
The risk in mutual funds is spread over a range of products
Investing in stocks requires investors, especially those just beginning, to do extensive research
In mutual funds, the research is done by experts as a professional fund manager is tasked with managing the pool of investment
But this service by a domain expert comes with an annual fee.Investing as a beginnerNew investors are advised to begin with mutual funds to
get acquainted with the market
Also, the fund manager, with years of experience and the ability to analyse and interpret financial data, would be making the decisions
With the fund manager doing the research, it is he who has to invest time while you can be passive
Those who invest in stocks have to track and analyse their investments themselves.Risk vs returnAs said earlier, mutual funds have the
advantage of reducing the risk by diversifying an investment across a portfolio
Stocks, on the other hand, are vulnerable to market fluctuations, and the performance of one stock can't compensate for another.Tax gainsIf
you sell your stock holding within a year from the purchase date, you will have to pay short-term capital gains tax at the rate of 15 per
But there is no tax on capital gains on the stocks that are sold by the fund, a substantial benefit
With mutual funds, you can claim tax benefits under Section 80CCG as well as 80C if you have an equity-linked savings scheme.Investment
durationInvesting in mutual funds requires 5-7 years to generate good returns
Stocks can give you good returns if you invest in the right ones and sell them at the right time.
