Mutual Fund Investment: Most people in India have a perception that investing directly in stocks delivers higher returns. Investors tend to put their hard-earned money in such stocks to chase returns. However, one must not forget that returns and risk go hand in hand. Also, there are other factors such as time horizon, goals, diversification and risk appetite which must be considered before investing.
Mutual funds have various advantages listed below that make them a better option than investing directly in stocks:
1. Diversification & Risk: When one invests in stocks directly, one’s portfolio tends to be either over diversified or concentrated which may lead to lower returns or higher risk. However, equity mutual funds, for instance, invest in about 30-50 good stocks that gives an ideal spread to the portfolio and reduces the risk.
