Both Vidya Balan and Angelina Jolie act in movies and both are a huge commercial success having delivered many hits. However, I believe that comparing the two should end at this point.
It makes no sense to ask which of them is better in her craft given that
- they cater to vastly different audiences
- their movie budgets are simply not comparable
- participation during movie-making, marketing and promotion varies a lot.
Similarly, while both Direct Equity and Equity Mutual Funds mean investing in stocks and both have delivered phenomenal returns, this is where the similarity ends. It makes no sense to ask which of them is better given that
(a) They cater to vastly different class of investors
It requires great knowledge and expertise to identify the right stocks to buy and sell. If you do not possess such skills, it would be prudent not to buy stocks directly. Don't tell me that a novice can consistently beat a professionally qualified and richly experienced fund manager. Equity Mutual Fund is an ideal product for such an aam investor.
(b) The budgets desired are simply not comparable
A meagre sum of say Rs.1 lakh will hardly buy you a decent set of "quality" stocks. [Note: I am not talking of penny stocks here as they will, more often than not, leave you penniless.] Yet the same amount of money, when invested in 3 to 4 varied kinds of mutual fund schemes, will give you a well-balanced and diversified portfolio.
(c) Degree of day-to-day involvement differs a lot
In recent times, due to increasing globalization and rapid innovation, businesses face an extremely dynamic environment. Which means that the fortunes of a business can change overnight. Therefore, if you are not always on the top of your stocks, your portfolio will soon lose all relevance and become outdated. Since the fund managers take care of this aspect on a daily basis, with mutual funds you can take a more relaxed and detached approach.
Concluding, I repeat what I have always advocated, argued and asserted, that DO NOT fall for the charms of Direct Equity, UNLESS you have
i. sufficient knowledge to buy/sell the right stocks
ii. sufficient money to build a diversified portfolio
iii sufficient time to actively monitor your investments
If not, buying Equity Mutual Funds will any day be more profitable. Don't underestimate the power of this common man's investment (You would be most surprised to read 'Become a crorepati - safely and surely - with...' and 'I am fed up with equity. It has given 'nothing' in last 5 years.').
