When you start your journey towards building wealth, you will likely come across two popular options: the stock market and mutual funds. Bothsound promising and offer unique advantages. But which one suits you best as per your financial goals, risk appetite, and preferred level of involvement?Before making a decision, it is important to learn about what each option involves.
Let’s check out the benefits and risks of each approach to see if your financial needs are best served by stocks, mutual funds, or a thoughtful mix of both.
Stocks: Direct ownership and control
Stocks, oftenreferred to as shares or equities, represent ownership in a company that is publicly traded on exchanges. As a shareholder, you mayobtaina claim on the company’s assets and earnings. Share prices fluctuate based on company performance, demand, supply, market trends, and investor sentiment.
Mutual funds: Expert management and diversification
A mutual fund pools money from many investors and invests it in a diversified portfolio of assets like stocks, bonds, commodities (e.g., gold), or other securities. Professional fund managers handle these investments with a focus on achieving the fund’s stated objectives.
You purchase units of the mutual fund, and their returns depend on how well the fund’s portfolio performs. The price of each unit is reflected by the Net Asset Value (NAV), which changes daily based on the underlying investments.
Pros of stocks
- Better returns: Stocks can significantly appreciate in value if you identify companies with strong fundamentals or unique products.
- Diverse sector exposure:You can allocate capital across multiple sectors, such as technology, banking, and FMCG, to minimise risks and increase returns.
- Dividend income:Purchasing high dividend yield stocks offers an additional income stream alongside the potential for price appreciation.
- Liquidity:Stocks, particularly large caps, are highly liquid assets. Hence, you can purchase or sell them quickly during trading hours. Also, the move towards T+0 settlement means trade completion and fund transfer now happen on the same day.
- Voting rights: After you become a shareholder, you typically gain the right to vote in the company’s important decisions.
Just make sure to usea premium stock market app, which offers live market updates, useful analysis tools, smart screeners, and high-quality research to help you make calculated decisions.
Pros of mutual funds
- Professionalmanagement:Fund managers select, monitor, and rebalance assets within the fund’s portfolio.
- Diversification: Mutual funds spread your investment across multiple securities and asset classes to minimise risk.
- Low minimum investment: You can begin a Systematic Investment Plan (SIP) with as little as ₹500 per month and enjoy long-term growth.
- Tax-saving options: Equity-Linked Savings Schemes (ELSS) offer tax benefits under Section 80C, while their equity exposure offers the possibility of higher capital appreciation.
- Variety of funds: There are equity, debt, hybrid, and index mutual funds to suit every risk profile and financial goal.
Make sure you use a reliable mutual fund app to enjoy an informed, confident, and hassle-free investing journey.
Mutual funds vs stocks | Comparing the risks
The following table explores the risks and considerations for both options.
| Aspect | Stocks | Mutual funds |
| Risk | High, prices can fluctuate sharply | Lower due to diversification, but notrisk-free |
| Expertise needed | High, requires research and monitoring | Low, fund managers handle decisions |
| Diversification | Limited unless you buy several stocks | Built-in across sectors/assets |
| Control | Direct, you decide which company’s stocks to buy or sell | Indirect, fund manager decides |
| Transparency | Data updates in realtime, you can track prices, trades, and news instantly | NAV updates once a day, portfolio disclosures are periodic |
Key takeaways
Stocks give direct control and the potential for strong returns but require active involvement and a higher risk appetite. Mutual funds provide diversification, professional management, affordability, accessibility, and a more hands-off experience. This isn’t an “either-or” decision. You can combine stocks and mutual funds in your portfolio to benefit from both growth opportunities and stability.
For this balanced approach, you can rely on MO Riise. Backed by the legacy of Motilal Oswal, a SEBI-registered public entity, more than 40 lakh users already use the app for both their stock market and mutual fund investments.
MO Riise simplifies your stock market and mutual fund investment journey by offering high-quality research ideas, UPI-based payment options, helpful analysis tools, curated recommendations, and an information-rich FAQ section. If you have any queries, assistance is available 24/7.
Download MO Riise today and redefine your investment strategy!
