A common dilemma that investors face when considering investing is whether to invest directly in equity or equity mutual funds. Most new investors are unaware of what is equity fund. They are types of mutual funds that invest principally in stocks. Generally, investing in equity funds can be rewarding for investors with the professional acumen to decipher market movements and technicalities of how stock markets work.
If you want to know the best option for you, this article lists the top factors you can consider to make an informed decision.
Time to track equities
Many investors think investing is as simple as acting on tips from market experts and buying or selling stocks based on their recommendations. In reality, it takes years of research, knowledge and technical skills to understand how to pick the right stocks. If you can take the time to research, monitor market trends and conduct analysis, investing in equities can be an ideal opportunity.
Amount of surplus
To grow your money, diversify your investments and allocate across various assets to spread risks. You could invest a larger investment capital in spreading your risk across ten to twelve stocks. Mutual funds allow you to invest in a diversified portfolio with small amounts of money.
Few stocks v/s bigger schemes
Are you considering focusing on individual stocks or do you plan to invest in larger market schemes? If you are only looking at buying a few shares, investing in equities could work out. However, if you want to participate in the market as a whole, equity mutual fund investment can be an apt choice.
Investing for long-term goals
Usually, most investors invest in mutual funds to achieve a financial goal in the long run. Even direct equity investments are not made in isolation and have some goals attached to them. Mutual funds perform better when the goal is to build a corpus in the long term as they are based on sound risk management.
For example, if you buy a few stocks directly in the real estate sector and it under-performs, you stand the risk of not meeting your goal. But, with a mutual fund portfolio, your portfolio is well-balanced with investments in multiple sectors.
Systematic Investment Plans [SIPs]
When you invest directly in equities, you are required to invest in each stock every time. In the case of mutual funds, you can simply activate automated SIPs to invest regularly every week, month or quarter.
Conclusion
So, if you are willing to devote time to monitor the market and acquire stock market skills, you can consider investing in equities directly. On the other hand, an excellent alternative would be to invest in mutual funds online and let a professional fund manager handle your portfolio.