InvestorQ : Which one gives better returns among stocks and mutual funds?
Moii Chavate made post

Which one gives better returns among stocks and mutual funds?

vani Patil answered.
1 year ago
Stocks and mutual funds are both tools to create wealth. Though stocks are assets by themselves, mutual funds are vehicles to invest in assets like stocks, bonds, etc. Mutual funds are actually an umbrella term, under which you have categories like debt funds, index funds, equity funds, hybrid schemes, etc.

Since you’re making a comparison with stocks, I am assuming you mean to compare it with equity mutual funds. Direct investment in equity and investing through mutual funds are both ways of creating wealth over a long investment horizon. However, what needs to be understood is which of the two ways fits better with your strengths, skill sets, and investment goals. If you are a novice in the stock markets, then investing through mutual funds (MFs) is the right way to go for the following reasons: 

a) Some of the risks of stocks is mitigated in equity mutual fund schemes as it is managed by experienced and capable professionals.
b) Buying or selling a stock/company requires extensive research and in-depth knowledge about the company and the sector it performs in. Fund managers have a team dedicated to this research.
c) Diversification is another key advantage mutual funds have over overstocks. If you invest through mutual funds, you can get access to a widely diversified portfolio by investing a very small amount (as low as Rs500/month through SIP).
d) If you sell your stocks at a profit within 1 year, you are liable to pay short-term capital gains tax (STCG). This is not the case with mutual fund schemes. 

All in all, in conclusion, both ways of investment aid wealth creation. However, if one is new to investing in stock markets, mutual funds are the way to go