Friday, February 2, 2007

Mutual Funds v/s Direct Stocks Investing

Investing in the equity market directly is exciting and sexy. You are in the thick of things and are able to take responsibility for yourself. Though the volatility and the information overload makes it a daunting task.

How about investing through Mutual finds? Doesn't it have its own loading and administrative charges and the fund managers making merry on your hard earned money? And can't we see the best performing mutual funds and follow their portfolio?

Here are some points to ponder:
  • We should allocate our time to investment decisions in proportion to our income generation goals.
  • Convenience and hassle free investing should be a major factor.
  • Fund managers are into it full time. If we able to identify fund managers who have consistently performed over last 3-5 years, nothing like it.
  • The fund manager also has the muscle power of crores of Rupees and is able to take entry and exit decisions impartially.
  • MFs continuosly churn their portfolio. When MFs buy and sell stocks, they don't have to pay capital gains as you do when you churn.
  • We are likely to panic over market crashes. MFs can take advantage of a crash!
  • With Systematic Investment plans (SIP), you can start investing with as low as Rs 500 per month.

There is another financial product called ETF: Exchange Traded Funds. They are the least expensive and manage themselves on their own.

Take your call.

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