Mutual Funds vs Stocks –Returns, Risks, Performance, Pros and Cons - Wikipedia of Finance

Mutual Funds Vs Stocks – Returns, Risks, Performance, Pros and Cons


Should I be investing in equity at all? Do you know about mutual funds vs stocks returns risk and returns analysis? Do you know mutual funds vs stocks performance in India which is better? Do you know mutual funds vs stocks pros and cons? Since you would be having many questions, whether you should invest in mutual funds or stock market.

Many investors avoid equity completely to escape risk. Almost all who do so lead the risk of having his or her returns eaten up almost entirely by inflation. Equity investment will come with danger, with high short-term volatility, but no one should invest in the stock market for the short-term gains and mostly no one have good knowledge on stock market risk & returns volatility.

It’s a long-term investment have capacity to deliver good returns, greater than even property, while offering high liquidity. The two more frequent ways to invest at equity is through the stock market and also through equity based mutual funds. Let’s understand which one you’re more suited to.

Mutual Funds vs Stocks – Which is Better?

Let us first understand, investing in stock market is worth or investing in mutual is worth. So this is the right time for you to analyse mutual funds vs stocks returns, mutual funds vs stocks performance, mutual funds vs stocks tax benefits, mutual funds vs stocks pros and cons. At the same time most of them failure to analyse stock market either through fundamental analysis or technical analysis.

Is Stock Market Investing Worth?

You can make pots of money investing in the stock market. Ask anyone who invested in Infosys in the early ’90s or Reliance in the ’80s. There’s so much money to be made that a salaried professional would wonder why he doesn’t give up the 9-to-5 and just invest in equity. But there’s a catch, of course. Stock market investment requires ability, skills, patience, undertaking plus time period, failing which you can loss a ton of your money.

Traders vs investors: individuals who invest / spend their money in the stock market are traders and investors are the two main types. Traders seek to make a profit from the difference between today’s and tomorrow’s prices. This takes special skills and is also time-consuming and risky. An investor, on the other hand, does away with short-term fluctuations by staying invested for the long term.

Trading is surely not for investors, long-term investment can be considered by investors who are willing to put in some time and effort to study different company’s fundamentals and technical indicators of growth. As you’re doing it all on your own, you keep the gains entirely (excluding what you pay as a brokerage, demat account or taxes, if any).

Is Mutual Fund Investing Worth?

Mutual funds offer nearly all the gains of the stock market at a small reasonable price. Instead of learning about the market and following sectors/companies, you simply pay professional investors to grow your money. You maintain with everything and also job whilst one’s finances grows along with the market. The money you invest is pooled along with the funds of incredible numbers of others like you to create a fund (hence, mutual fund).

To put it in simple words, stock market investment is for those who are having an understanding of the markets as well as time to keep track on company’s performance. Mutual fund investment requires less specialized knowledge and involves less effort. Here you should know about some benefits of mutual funds.

Risk and Returns

When analyzing mutual funds vs stocks risk and returns, if you’re the type of investor who doesn’t like risk, but understands the risk inherent in safer investments, then equity mutual funds are a good way to get going with this asset class. For small cost, their money is managed and also growing faster than any fixed deposit rates.


Mutual funds enables diversification in the stock market. Whereas you’re risking your money on one particular company when you buy shares, a mutual fund is a pooled investment.

One particular mutual fund will have opportunities in many shares. So if one company has a poor quarter or gets bad rating over a year, your money will be switched to other best companies.

For example, when Satyam’s stock crashed, their shareholders would have lost a lot, whereas mutual fund investors noticed minimal loss as fund managers have shifted funds to other well researched company.

Tax Benefits and Advantages

Equities are the most effective tools from the perspective of taxation. Dividends are exempt from tax. Dividend Distribution Tax is not applicable. There is no capital gains tax if held for a period of one year. Even short-term capital gains are taxable at 15% – 20%. The rules are same regardless of direct investment in equity or investing through mutual funds.

Beats Inflation

When analyzing mutual funds vs stocks performance you notice that, good part of investing in equities either through mutual funds or stocks is that, they can beat the inflation easily over the long term.

The guy who is running the grocery store may be making good money than the young software professional. That is because, the returns are way higher in grocery store business.

On the other hand, your fixed deposits offer returns which cannot beat inflation after taxes. Investing in fixed deposits or term deposits may be a bigger risk than the risk involved in equity investment.

Zero Interest Rate Reduction Risks

Equities have its own risks, but mostly when investing for short term when analyzing mutual funds vs stocks pros and cons. On the other hand, with non-equity investments (like: fixed deposits, recurring deposits, etc), you run the risk of interest rate reduction.

Economists tend to reduce interest rates so that businesses can flourish. Have you realized, though, that all your fixed income instruments, such as post office savings schemes, fixed deposits and bonds all have lower yields.

This results in lesser maturity value which doesn’t even keep pace with inflation. Equity mutual funds may give poor returns over a couple of quarters, but staying invested over the long term, you will surely see double digit returns.


Mutual Funds are managed by professionals in stock markets. They provide great diversification than stocks. When you analyse mutual funds vs stocks returns in India, mutual funds vs stocks performance in India, mutual funds vs stocks pros and cons in India you notice that, investing in direct stocks have more risk but comparatively earning is better in mutual funds. It is better to invest in direct mutual funds that are equity oriented, as your funds are managed by your expertise funds managers. Stay Safe, Stay Invested….!

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