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Tuesday, 24 November 2009

MUTUAL FUNDS BETTER THAN DIRECT EQUITY INVESTING

Posted on 02:33 by Unknown

MUTUAL FUNDS - YOUR BEST TOOL FOR WEALTH CREATION



Most of the investors may not know which stocks to invest in and, once any rally starts, they jump on to the bandwagon and invest in some stocks which they feel will be next multibaggers. Their expectation either on the basis of mere hearsay or their own gut feeling. They neither have the expertise in selection of quality stocks, nor the time or the inclination to engage in painstaking research for picking up good stocks. Result: most of them end up with losses and dud stocks in their hands at the end of the rally.
So, what's the way out for these investors? The answer is simple: buy equity mutual funds. If you don't under-stand equities market, buying equity mutual funds is probably much better
than buying equities themselves.


Investing in a Mutual Fund rather than Direct Equity Investing is always better and more profitable. There are lots and lots of advantages by investing in a Mutual Fund instead of Direct Stock Investment. Some of the most prominent are :
1. Financial Expertise :
Investment in Stocks is a time-consuming afffair. And most importantly, you require expertise to analyse the Balance Sheet and ability to foresee the future scope of Companies. However, by investing in a Mutual Fund, you are hiring a Fund Manager for a ridiculous price. So, investing in Mutual Funds not only saves you time but also enables your money to be handled by a Equity Expert.

2. Diversification :
Investing a Mutual Fund gives you instand diversification. In fact, this is true for even a 'Sector' Fund. With just one fund, say "Religare PSU Equity Fund" you are getting exposure to a whole bunch of Public Sector Companies.

3. Low Risk :
By investing in a Equity Share directly, you are exposed to risk of the Company going bust (ex.Satyam), even if you had done through analysis. Mutual Funds, even if they have exposure to such stocks, the risk is mitigated by the other stocks the Fund holds.

4. Liquidity :
You get back your funds in under 2 working days (in liquid funds). Some Stocks might have liquidity problem, but Mutual Funds do not face this problem.

5. Flexibility :
You can invest in Mutual Funds with an amount as low as Rs.100 per month!!!!!! Thus, even with Rs.100 per month, you get an opportunity to invest in a Diversified Stocks and Sectors.
You can also "switch" from an equity to debt to balanced fund depending on your risk/asset allocation with "NIL" cost.

6. FOREIGN EXPOSURE :
With Direct Equity, you can't buy Foreign Stocks, which you can do with Mutual Funds. And all this at your convienience.
You can get the Sensex/Nifty exposure with just a single Fund.
Mutual Funds thus let you invest 'where you can't'

7. High Returns :
Most of the Funds are known to outperform the Nifty/Sensex by a wide margin regularly and consistently.

8. High Transperancy :
Mutual Funds are regulated very highly. In fact, SEBI has been more vigilant on Mutual Funds, than even insurance. Mutual Funds have to mandatorily disclose their NAVs daily.

8. Cheaper :
ULIPs are the closest to mutual Funds in terms of structure and fuctioning. However, your investment in Mutual Funds get 'fully' invested, whereas in ULIPs, nearly '40%' goes to the Insurance Agent.





CONCLUSION:
There is no other investment class which offers the wide cumulative advantage that the Mutual Fund investment offers.
With an investment in Mutual Funds, you get
Professional management
Instant Diversification
Flexibility
Liquidity
Returns comparable to any other investment class.

Even the latest issue of Dalal Street Journal has its Cover Story titled "Its time for Mutual Funds".

Best of luck,



Srikanth Matrubai

Also visit

http://equityadvise.blogspot.com
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