What are the advantages of investing in Mutual funds as compared to stocks?

Investing in open stocks is difficult for investors who have never invested in stocks. Most people find it very challenging to select the right stock to buy at the right time. Investing in stocks is a regress activity and needs efforts such as time and research to choose the perfect stock. For most of us, the goal is to get higher returns from our savings. So this business of learning through losses turns out to be a deal-breaker.

Mutual funds have trained fund managers who are experts in their field whose only job is to look at the related developments in the stock market. So it’s better to leave the investing to the professionals.

Investing in mutual funds is much easier as compared to stocks. Investing in mutual funds can be done by just completing your KYC.

Mutual funds investment can be started by a minimum amount of Rs. 500. For example, if you invest in mutual funds through a systematic investment plan (SIP), you can invest as little as Rs 500 a month.

Another benefit of mutual funds over stocks is that you can invest in equity and get a tax benefit at the same time. There are certain types of funds called equity-linked savings schemes (ELSS), Investments in which are exempt under Section 80C of the Income Tax Act.

Investing directly in stocks is more expensive as compared to Mutual funds because you have to pay brokerage fee and Securities Transaction Tax (STT). But in mutual funds, you enjoy the benefit of economies of scale as mutual funds purchase a large number of shares.

In my opinion, direct investment in stocks is for those who have sufficient experience and interest in equity markets. If you are unable to spend too much time on equity research, mutual funds are the better option.