It's difficult to predict a winner between mutual funds (MFs) and stocks. Both investment products are dependent on the performance of the economy, sectors, and individual companies.
Mutual funds come with diversification opportunities which helps when the markets are volatile. Investing in mutual funds via SIPs also allows investors to benefit from price movements and frees them from timing the markets.
Stocks on the other hand give investors greater flexibility to invest in companies they believe in and know. It’s a high risk, high reward investment option.
Most investors on Groww diversify across both the products; they start SIPs in two or three well-performing mutual funds, pick a few stocks that they understand, and invest for the long term.
Whether one goes for mutual funds or stocks or a combination of both in 2021, the key lies in investing as per your investment profile.
Ultimately, it's the investor who wins. Both equity mutual funds and stocks are dependent on the performance of the economy, sectors, and individual companies.
Mutual funds offer diversification opportunities, which helps when the markets are volatile, while SIPs help investors benefit from price movements.
Stocks, on the other hand, offer a way to invest in what you believe in and know. It is a high risk, high reward investment option.
Most investors on Groww diversify across both the products; they start SIPs in two or three well-performing mutual funds, pick a few stocks that they understand, and invest for the long term.
On our platform, we have seen that there is a strong synergy between mutual funds and stocks. In fact of all stock investors onboarded, about 40% of the users are also investing in mutual funds.
So we haven’t really seen a drastic shift in investment preference from mutual funds to stocks as such. As investment options, stocks and mutual funds have their pros and cons.
I wouldn’t say that either is better because their efficacy depends on the type of investor and their investment needs. Each investor is unique and needs to find the right combination of investment avenues to ensure that the financial goals are met with minimal exposure to risks.
Mutual funds are a preferred option for many first time investors looking to participate in equity investing, largely due to the diversification it offers as well as it being professionally managed by fund managers.
However, novice investors who spend some time to get a grip over stock investments, earn good returns too. Investing in direct equity also allows investors a greater degree of freedom in creating their own portfolios.
Whether one goes for mutual funds or stocks or a combination of both, the key lies in sticking with the investment plan.
(Harsh Jain is Co-founder and COO, Groww)
Disclaimer: The views and investment tips expressed by experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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