Mutual Funds or stocks? Which will be a greater solution for investment in the New Year? Experts think that it is tough to predict a winner as each the investment merchandise are dependent on the efficiency of the economy, sectors and person corporations.
Mutual funds come with diversification possibilities which assists when the markets are volatile. Investing in mutual funds through SIPs also permits investors to advantage from value movements and frees them from timing the markets, Harsh Jain, Co-founder and COO, Groww, told FE Online.
Talking about investment in stocks, Jain stated that it provides investors higher flexibility to invest their challenging-earned dollars in corporations they think in and know. “It’s a high risk, high reward investment option.”
In 2020, investors beneath the age of 30 produced up more than 2/3rd of the customers on Groww platform, which gives the alternative to invest on the net. Jain stated that a marked shift in the typical age of investments has been noticed. While earlier generations began investing nicely into their mid-thirties, millennials are beginning to invest as early as mid to early twenties. On Groww platform, the typical age of a millennial investor is 28.
Despite COVID-19 pandemic and the lockdown, investors’ interest in each mutual fund SIPs and stocks has gone up in 2020.
Jain stated that from January to March, 70% customers invested through SIP on Groww. This quantity improved to 77% in the course of the lockdown period, in particular about the time markets have been volatile, displaying a higher awareness amongst the user base about SIP being the very best investment mode in the course of volatile markets, owing to the advantage of Rupee price averaging it provides.
Groww launched stocks on its platform in June 2020 and more than 8 Lakh Demat accounts have been opened because then. Jain stated, “Since the launch of Groww stocks, our observation is that currently, more than half of the new users onboarded on Groww intend to invest in stocks. About 50 % of these investors also start adding mutual funds to their portfolio within a few months of starting stock investing on Groww.” So, what about 2021?
Stocks vs Mutual Fund SIP: Key to investment in 2021
Jain stated that no matter if a single goes for mutual funds or stocks or a mixture of each in 2021, the essential lies in investing as per your investment profile.
“Both equity mutual funds and stocks are dependent on the performance of the economy, sectors, and individual companies. Mutual funds offer diversification opportunities, which helps when the markets are volatile, while SIPs help investors benefit from price movements,” stated Jain.
“Stocks, on the other hand, offer a way to invest in what you believe in and know. It is a high risk, high reward investment option,” he added.
There is a powerful synergy involving mutual funds and stocks. In reality, a significant quantity of stock investors are also investing in mutual funds. There is no drastic shift in investment preference from mutual funds to stocks as such.
Stocks vs SIP: Pros and cons
According to Jain, stocks and mutual funds have their pros and cons as investment choices. “I wouldn’t say that either is better because their efficacy depends on the type of investor and their investment needs.”
Each investor is distinctive and demands to obtain the appropriate mixture of investment avenues to guarantee that the monetary objectives are met with minimal exposure to dangers.
Mutual funds are a preferred alternative for lots of initially time investors hunting to participate in equity investing, largely due to the diversification it provides as nicely as it becoming professionally managed by fund managers. However, novice investors who devote some time to get a grip more than stock investments, earn fantastic returns as well, stated Jain.
Investing in direct equity also permits investors a higher degree of freedom in making their personal portfolios.
“Whether one goes for mutual funds or stocks or a combination of both, the key lies in sticking with the investment plan,” he concluded.
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