Mutual Funds vs. Stocks: Which is a better investment for you?

Learn more about mutual funds and stocks to plan your investment portfolio.

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3 mins
10 July 2023

Mutual funds and stocks are two of the most popular investment options available to investors. Both offer growth potential, but they also come with different risks and benefits.

What is a mutual fund?

A mutual fund is a type of investment that pools money from a group of investors and invests it in a variety of assets, such as stocks, bonds, and money market instruments. Find more than 1200 funds on our platform which are categorized broadly into equity, debt, and hybrid funds. Mutual funds on the Bajaj Finance platform are managed by professional fund managers who are responsible for selecting the assets to invest in and making investment decisions.

What is a stock?

A stock is a type of investment that represents ownership in a company. When you buy a stock, you are essentially buying a small piece of the company. Stocks can be bought and sold on stock exchanges, and their prices can fluctuate based on a variety of factors. Some of these factors are the company's financial performance, economic conditions, and investor sentiment.

Benefits of mutual funds listed on the Bajaj Finance platform

There are several benefits to investing in mutual funds showcased on the Bajaj Finance platform. Some of the key benefits include:

  • Diversification: One of the biggest benefits of mutual funds is that they offer diversification. This means that your money is invested in a variety of assets, which can help to reduce your risk. For example, if you invest in a stock mutual fund, your money will be invested in a variety of different stocks. This helps to reduce your risk because if one stock goes down, your other stocks may still go up.

  • Professional management: Mutual funds are managed by professional fund managers who have the expertise and experience to make investment decisions. This can be a valuable benefit for investors who do not have the time or expertise to manage their investments. You will the information of fund managers in the individual fund pages under mutual funds on our platform.

  • Low cost: Mutual funds can be a relatively low-cost investment option. This is because the costs of managing a mutual fund are spread out over all the investors in the fund. You will find the exit load, taxation, and expense ratio of each fund specified on the fund page of individual funds on our platform.

Benefits of stocks

There are also several benefits to investing in stocks. Some of the key benefits include:

  • Potential for high returns: Stocks have the potential to generate high returns. This is because stocks can appreciate over time. For example, if you invest in a stock that goes up in value by 10%, you will make a 10% return on your investment.

  • Control: When you invest in stocks, you have more control over your investment than when you invest in mutual funds. This is because you can choose which stocks to invest in.

  • Liquidity: Stocks are more liquid than mutual funds. This means that you can sell your stocks quickly and easily.

Use the Bajaj Finance SIP Calculator to get an idea of the returns on your mutual fund investment.

Which is the better investment: mutual funds or stocks?

So, which is the better investment: mutual funds or stocks? The answer depends on your circumstances and risk tolerance. If you are looking for an investment that offers diversification, professional management, and low costs, then mutual funds may be a good option for you. However, if you are looking for an investment with the potential for high returns and control, then stocks may be a better option for you.

Ultimately, the best way to decide which investment is right for you is to consult with a financial adviser. A financial adviser can help you to assess your circumstances and risk tolerance and recommend the best investment options for you.

You can always refer to the Riskometer present in the fund page on our platform to gauge the risk attributes of mutual funds before considering between the two.

Here are some additional factors to consider when choosing between mutual funds and stocks:

  • Time horizon: How long do you plan to invest your money? If you are investing for the long term, then stocks may be a better option because they have the potential to generate higher returns over time. However, if you are investing for the short term, then mutual funds may be a better option because they are less volatile than stocks.

  • Risk tolerance: How much risk are you comfortable with? Stocks are riskier than mutual funds because their prices can fluctuate more. If you are not comfortable with risk, then mutual funds may be a better option for you.

  • Investment goals: What are your investment goals? If you are saving for retirement, then mutual funds may be a good option because they offer diversification and professional management. However, if you are saving for a specific goal, such as a down payment on a house, then stocks may be a better option because they have the potential to generate higher returns.

It is important to remember that there is no one-size-fits-all answer to the question of whether mutual funds or stocks are the better investment. The best way to decide which investment is right for you is to consult with a financial adviser.

Disclaimer

Bajaj Finance Limited (“BFL”) is a Non-Banking Financial Company carrying the business of acceptance of deposits, providing lending solutions to Retail & Corporate customers, and is a Corporate agent of various insurance Companies. BFL is also registered with the Association of Mutual Funds in India (“AMFI”) as a distributor of third party Mutual Funds (shortly referred as ‘Mutual Funds’).

BFL does NOT:

(i) provide investment advisory services in any manner or form;

(ii) perform risk profiling of the investor;

(iii) carry customized/personalized suitability assessment;

(iv) carry independent research or analysis, including on any Mutual Fund schemes or other investments; and provide any guarantee of return on investment.


In addition to displaying the Mutual fund products of Asset Management Companies, some general information is sourced from third parties, is also displayed on ‘As-is’ basis, which should NOT be construed as any solicitation or attempt to effect transactions in securities or the rendering any investment advice. Mutual Funds are subject to market risks, including loss of principal amount and Investor should read all Scheme /Offer related documents carefully. The NAV of units issued under the Schemes of mutual funds can go up or down depending on the factors and forces affecting capital markets and may also be affected by changes in the general level of interest rates. The NAV of the units issued under the scheme may be affected, inter-alia by changes in the interest rates, trading volumes, settlement periods, transfer procedures and performance of individual securities. The NAV will inter-alia be exposed to Price / Interest Rate Risk and Credit Risk. Past performance of any scheme of the Mutual fund do not indicate the future performance of the Schemes of the Mutual Fund. BFL shall not be responsible or liable for any loss or shortfall incurred by the investors. There may be other / better alternatives to the investment avenues displayed by BFL. Hence, the final investment decision shall at all times exclusively remain with the investor alone and BFL shall not be liable or responsible for any consequences thereof.

Bajaj Finserv Direct Limited, (“BFDL”), a wholly owned subsidiary of Bajaj Finserv Limited (is a Registered with SEBI as an Investment Advisor with Registration no. INA000016083). BFDL enables resident Indian customers to directly invest in third party mutual funds through its online platform. BFDL entered into a referral arrangement with BFL, whereunder, BFL may, without risk or responsibility on its part, refer the resident Indian customers who are interested in placing their investments in Direct Mutual Funds through BFDL online platform. Investment by a person residing outside the territorial jurisdiction of India is not acceptable nor permitted.

Disclaimer on Risk-O-Meter:
Investors are advised before investing to evaluate a scheme not only on the basis of the Product labeling (including the Riskometer) but also on other quantitative and qualitative factors such as performance, portfolio, fund managers, asset manager, etc. and shall also consult their financial advisers, if they are unsure about the suitability of the scheme before investing

Frequently asked questions

Can a single investment portfolio contain both mutual funds and individual stocks?

Absolutely! A diversified portfolio, which includes both mutual funds and individual stocks, is popular among investors.

Is it better to invest in stocks or mutual funds for long-term?

Particularly for retirement portfolios, mutual funds are frequently regarded as suitable for long-term investing. Stocks have a higher potential for returns but also more volatility.

Is a mutual fund riskier than a stock?

Stocks and mutual funds have different risk profiles. Individual stocks have a higher level of individual risk than mutual funds, which also provide diversification and professional management.

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