Stock market vs mutual funds: Where should you invest?

Investors must look for the best investment tools to keep up their financial well-being. Investing in stocks and mutual funds may help investors earn inflation-beating returns over time. But it is important to consider the number of risk factors, goals, and individual portfolios before making the investment. When it comes to selecting between the stock market and mutual funds, investors are often caught in the dilemma of where to invest.

Money9 Helpline hosted Roongta Securities’ Harshvardhan Roongta to resolve the queries on stocks vs mutual funds and which one of the two will give the safest and best returns with a minimum amount of risk.

Edited excerpts:

Shashi Kaushal: I am 35 years old single father of an 8-year-old child. I want to build a corpus of Rs 2 crore by the time my child goes for higher education. Should I opt for stock market or mutual funds to achieve the goal?

Roongta: If you want to invest in the stock market directly, and you have a strategy and know where and when to invest, then you can consider it. It is important that you know these basics so that you can design a strategy to walk out. If you aren’t able to conduct that level of management then you can simply opt for a basket of funds you can invest via a fund manager who is knowledgeable enough to invest your money as well as withdraw it at the right motion of time. You just have to deposit a fixed amount or a lump-sum amount you have to invest in the scheme advised by the fund manager. I suggest you make a diversified portfolio (large cap fund, index fund, large and midcap fund, and Flexi cap) you can choose from any of the categories and start investing in mutual funds and you can also invest in stocks of blue-chip companies which are evergreen in the market and add them up in your portfolio.

Shashi Kumar: I have invested in the Kotak Flexicap fund, the returns are not up to my expectations, should I exit?

Roongta: I wouldn’t suggest you exit from this fund, you are comparing it with the top-performing funds of the same category. This scheme is a very good and consistent performer if it is not able to make up on the top third or fourth position in the list for a year that doesn’t mean the fund is a bad performer. It is a very good fund managed by a good fund manager. I think you should simply continue, no need to make any changes.