Should you buy stocks directly or should you invest through an equity mutual fund? If you are confused what's the best way to go with? We got you covered. Listen to this episode to finance central to everything about stocks.
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[00:00:00] Welcome to Finance Central, Once again I am your host Jagu and I am going to tell you
[00:00:13] what is the purpose of this work that will make you a part of the investment.
[00:00:18] I hope you stay with me all through and I promise you a whole lot of learning in an easy
[00:00:24] and fun way today.
[00:00:25] We are going to talk about should you buy stocks directly or should you invest through
[00:00:31] an equity mutual fund.
[00:00:32] Let us talk about some more advantages of investing through a mutual fund.
[00:00:37] Very often we see an investor complaining that their portfolio fell by 30 percent when
[00:00:44] the NSC-Nifty index declined by only 10 percent.
[00:00:48] However, when the NSC-Nifty recovered the entire loss quickly, the investors found
[00:00:54] out that their portfolio was still down by 15 percent which means it recovered only
[00:00:58] half the losses in a rising market and investor often feels that while the entire market
[00:01:05] is going up their portfolio stagnant and there is a reason behind this.
[00:01:11] These investors fail to build a balanced and well diversified portfolio.
[00:01:16] It is not that investors can't diversify their portfolio.
[00:01:19] In fact, most investors own 15 to 20 stocks at any given point in time.
[00:01:25] However, these portfolios are skewed towards a few stocks.
[00:01:30] Very often many stocks in a typical investor's portfolio belong to one or two sectors that
[00:01:36] would have gone up recently.
[00:01:38] Say over the last 3 to 6 months then there is uneven allocation.
[00:01:43] More than half their money will be invested in just 2 or 3 stocks.
[00:01:47] Such law-sided portfolios not only fail to match the index on a sustainable basis, they
[00:01:53] also give stress in bad times.
[00:01:56] Mutual funds have a variety of options like diversified equity or equity hybrid funds.
[00:02:02] Amongst others, these kind of options can help build a more balanced portfolio and tackle
[00:02:07] market volatility much better.
[00:02:10] Mutual funds are a reliable option.
[00:02:12] If one is investing for a particular goal, as the risk profile and investment objectives
[00:02:17] are well-defined.
[00:02:18] Itryanay, one can also choose goal based funds such as a children-oriented fund or a retirement
[00:02:25] oriented fund.
[00:02:26] There is also the issue of churning.
[00:02:29] Individual investors tend to churn their portfolios frequently.
[00:02:32] Instead of holding on to a stock, sometimes they tend to book profit several times and then
[00:02:38] try to re-enter on a correction.
[00:02:40] Churning can be costly.
[00:02:42] A fund manager on the other hand realizes the maximum possible potential by holding
[00:02:48] onto the stocks as per the scheme's investment objective.
[00:02:51] So this was our Bhavishya's special podcast series, Finance Central.
[00:02:56] I am your host Ashish Jyartiyani.
[00:02:58] I will take you all from here.
[00:03:00] And I'll be back with another episode shortly.
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[00:03:23] Thank you.
[00:03:24] See you soon.