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Stocks, Mutual Funds, or ETFs: How Should You Invest? -- The Motley Fool

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NIFTY 50 9, Select Portfolio and Asset Combination for Display on Market Band. Download ET MARKETS APP. Drag according to your convenience. For a small fee, the investor gains from the stock-picking ability of the professional fund manager, does not have to track his portfolio and also benefits from tax exemption.

Related Here are the best 5 mutual funds for tax saving Mutual funds that retirees seeking regular income should opt for. For a small fee, the investor gains from the stock-picking ability of the professional fund manager , does not have to track his portfolio and also benefits from tax exemption of portfolio gains. Did you know that in India, individual investors hold more stocks than they have mutual funds?

The point is, why should an individual buy stocks through a mutual fund and pay an annual fee of around 1. Here are a few reasons why the fund route is better: No need to pick and track stocks When you invest in a mutual fund, you get the benefit of a fund manager's expertise.

Picking stocks, tracking them, making sector and asset allocation, booking profits when required— everything is done by a professional fund manager. Many stock portfolios are decades old, and could be holding stocks that are defunct today. Such junk stocks drag overall portfolio returns.

A professional fund manager ensures that the portfolio holds good stocks with potential for long-term returns. No tax on short-term gains When you manage your own portfolio, there will be some buying and selling. For a mutual fund, there is no capital gains tax on stocks sold by the fund.

Financial Advice for my Son - Mutual Funds and Individual Stocks

This can add up to significant benefits for you as an investor in that fund. Of course, one must hold one's equity fund for a year or longer to avoid short-term capital gains tax on the investment. If you buy and sell shares, you will probably pay 0. You also have to pay demat charges. However, due to their scale, mutual funds pay only a fraction of the brokerage charged to individual investors. This benefit gets indirectly passed to you as a mutual fund investor.

You also don't need a demat account.

Instant diversification A well diversified portfolio should have about stocks. But, such a portfolio can be created only with a large corpus.

Why would a person choose a mutual fund over an individual stock? | Investopedia

An individual might not have sufficient funds or mental bandwidth for a diversified portfolio. Mutual funds provide instant diversification. Since you buy units of the fund that invests across several stocks, you receive diversification benefit without investing a huge corpus.

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