Basics - Equity Market vs Equity Funds

As an investor, we are always confused about where to invest? What returns would we get? How much do we need to invest? Are we investing at right place? Should we consult an Adviser? If yes, then will he be giving us the right solution/ product? How much will he charge?

Thus, to overcome all this we all start searching on internet, ask friends and start investing on our own without proper understanding of the product. We often see the past returns or listen to friends & relatives and start investing in that product without having the deeper understanding of the product. Among the top investment options that everyone suggests us are Equity Market (Share Market) and Equity Funds as they give good returns and the returns are tax free too if realized after a year.

On hearing that, the first question that comes in our mind is which one is better? Now, that varies from person to person. Investing in Equity funds is less risky, doesn’t need must experience, less effort and less knowledge whereas it’s not the case with Equity Market. You would need good amount of time, lot of research, efforts, knowledge and stomach for risk to invest in this Equity Market. 

If we see in the list of best returns investment option, EQUITY MARKET stands at the top, but is stands at the top in riskiest investment options too. Thus, to invest in the equity market we should be either good enough to study the company or we should have someone who is good in this and we can trust them with our hard-earned money. Plus investing in Equity market may/may not need huge sum of money depending on the price and number of share we want to buy.

So, if we are not good with that or if we don’t have enough time to analyze the companies, it is best if we go into the equity market through mutual funds i.e EQUITY FUNDS. The reason for that is that the mutual fund companies have fund managers who have only one duty that is to manage the money we put in the fund and generate good returns. In mutual funds, they collect money from the pool of investors and invest them in the equity market. Hence, it saves us from risk by investing in many companies i.e. by diversifying our investments. The fund houses have a full-fledged research department to do the research on our behalf so that they perform better than or on par with the specified benchmark.

Now how to know which equity fund to invest in as there are a lot of them in the market. For that we need to do a little research or can consult a financial adviser. To do it by ourselves we need to understand some of the things regarding the fund we are looking forward to invest in. Things like the sectors covered by the fund, who is the fund manager, track record of fund manager, time for which we are investing and purpose of investing. Even when we are investing through some adviser, we can do some of our own research and check by ourselves if the adviser had given us the correct information/ advise. There is no problem if the commission is paid to the adviser, they should be paid by us for helping us to put our finances in place or by the company for selling their product. What we need is that the advice given to us should be good for us and as per our needs not a generic or as per the need of that adviser.

So, in simple words the choice is simple when it comes to equity market or equity funds. If we can do the through research on the company’s background, finances, their future plans, their balance sheets, if we have enough time to keep the track of that and our stomach butterflies do not bother us due to the temporary high and lows of market then we can go and invest in the equity market else invest in equity funds. Just remember that the investment means long term i.e. 10+ years, don’t focus on buying today and selling tomorrow. So, what should we do when we invest - we BUY, we KEEP, we STAY and then we EXIT at the right moment/ as per our requirement.

Let's keep the butterflies in control and let the time factor work to amplify the returns on our investments exponentially.  

HAPPY INVESTING