Mutual Fund v/s Direct Investment

13. Mutual Fund v_s Direct Investment- The 10 Most Promising Finance Companies In India 2022

“Investment in the stock market is subject to risk. Read all the scheme related documents carefully before investing”. That was the statement we used to hear in the advertisements a couple of years back. Now, Indians have put their foot on the pedal to accelerate their wealth from the capital & money market. 

However, many investors are classified into two direct categories: Risk-taker & Less Risk-taker. To make it simple, we can look at the investment options that offer higher risk with higher returns & less risk with compound growth. 

Mutual fund & Direct investment (Equity investment) are the two categories that are way more popular compared with other investment options in India. 

Let’s dive deep and try to understand both options that we have in our article title. 

Mutual Funds 

Getting your hands into the stock market without any prior knowledge or study could hit you hard on the pocket. Mutual funds provide you with the lowest risk on investment. Someone who has never invested in the stock market can start investing from a very small amount in mutual funds.

Every mutual fund service provider has a fund manager who diversifies your money in various stocks, which helps in reducing the risk of loss. It even allows you to choose the type of investment, depending on your financial goals, risk tolerance, and expectation of returns. 


  • Carry less risk & offer compounding benefits
  • Multiple investment options
  • Diversified portfolio
  • Less volatile compared to equity trading
  • Tax exemption under section 80 C if invested in the Equity Linked Savings Scheme (ELSS)
  • Needs less attention & monitoring
mutual vs direct

Direct Investment 

Risk takers have a high level of interest in direct trading in the equity market or popularly termed as share market. It has skyrocketed after the sharp fall in March 2020. All retail traders started investing highly in the equity market by saying, “Lala, Risk hai, toh Ishq hai”. 

Direct investment in stocks requires a high amount of research and study. Picking up stock at the lowest price and booking profit out of it is a risky game. Here you need to know the charts and company’s reputation and past performance. Intraday trading is one of the most preferred practice, as it is a money-spinner game. 

Regular monitoring helps you reduce the risk of loss in direct investment. Current trends in the Indian stock market reveal that retail traders are heavily engaged in intraday trading. Market data shows an upsurge from 10.5 million new Demat accounts in 2020, the number rose to 27.4 million new accounts by November 2021. 

Investment Choice 

A large part of adults is approaching to invest in the market to reap the benefits. Old results have shown the benefit who invested and held for the long term, gained a huge amount in return. 

You will gain an immense amount of profit if you invest for long. Short-term investment accounts for short-term capital gains tax. This amount can get bigger as you continue intraday trading in large volumes. Even a panic situation creates an effect of sharp selling that we have witnessed twice from March 2020 to February 2022. 

Final opinion

Investing in any of the options discussed in this article depends on the risk appetite. If you are skilled enough to consider investing in equity funds, you may end up gaining profits that you desire to earn. On the other side, if you are not willing to take high risks, it is better to opt for mutual funds.

It has become much easy to invest in the capital market with the help of fintech startups, which provide us the platform to invest in any stock or mutual fund with the lowest trading charges. We will recommend you to have at least some knowledge before investing anywhere. For that, you must be financially literate

– Parag Ahire

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