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Equity Funds vs Direct Investment

When a person gets ill, who is totally ignorant about the medicines and treatments he/she takes the services of a professional, i.e. a doctor, who not only analyzes one’s condition but also suggests the best treatment for the speedy recovery of one’s health.

In this case, the person counts on the experience and knowledge of the doctor and blindly faiths on the treatment given to him and finds himself health soon with the help of suggested treatments and medicines.

In the current scenario, the financial investment sector have the same condition too. 

Generally a new investor finds himself in a dilemma regarding where to invest from the number of investment options. When one decides, he/she has to invest for future, he feels that he/she can research from here and there and jumps in the direct investment market and starts buying stock which he/she have listened from here and there. This is just like taking medicines from the advice of unqualified doctors which surely have an adverse effect in the long run.

Similarly investing directly in stocks ensures higher flexibility and liquidity than mutual funds but direct investment in equity can have long term negative consequences if one do not have adequate knowledge about markets and the companies one is investing. As your portfolio depends on your choice of funds, even one wrong choice in the form of an unpromising pick can lead to huge losses in the whole portfolio. One is needed to have analytical skills and strong knowledge about the current economic conditions of the country and its impact on one sector or company, in order to derive benefits from direct equity investment. However, in the modern era, where people find very less free time or leisure time in the wake of demanding career, it becomes impossible for one to keep a close watch on the markets and the economy.

So in the modern scenario, the best bet one can put is on the modern equity funds. Modern equity funds are balanced funds which are managed by well qualified fund managers who analyze and study a lot of factors before devising a portfolio that is balanced in nature so that everyone who wish to invest, can book the benefit of the performance of the fund as a whole. This makes sure that every individual investor gets the benefit of the positive economic environment of the economy. If, by chance, an individual stock in the mutual fund fails to perform well, the other stocks in the lot balances the losses of a particular stock in the long run and makes it possible to keep afloat in the turbulent seas of the stock markets of the country.

An advisor’s aim should always not be on increasing the returns but also to contain the risks.

Direct equity investment appears more lucrative as it offers high returns but the problem with direct equity is that whole of one’s portfolio is at stake in times of volatility like nowadays. When the markets are highly volatile, it is essential not just to capture high returns but also to ensure minimum risk to the principal investments and portfolio. On the part of a prudent investor, it is essential then to look at other options which not only present an option of healthy returns but also helps in minimizing risks to the principal amount. Equity mutual funds, in the recent times, have served this purpose of providing good returns while keeping risks at minimum. In the modern era, one should invest wisely and should not run just behind high returns but should keep in mind that it is equally essential to restrict the risks to the minimum so as not to let his capital erode in the long run.

So it is beneficial for new and experienced investors alike to trust the experts regarding investment decisions and invest in one of the top mutual funds if one wishes to land one’s investment in high tide and in high spirits.