Are you street smart?

Apr 08 2014, 10:54 IST
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So, what’s the most prudent way to invest? So, what’s the most prudent way to invest?
SummaryWith markets on upswing, every investor wants his share of pie.

on the whims and fancies of a mutual fund manager.

If one stock is not performing as per expectations, the user has the option of selling and replacing it with a better performing stock.

As a shareholder of stocks of companies, one is entitled to attend general body annual meetings. Investing directly in the equity market is useful only for those who have an understanding of the fundamental and technical analyses of the underlying stock. Anyone entering the equity market directly relying on tips or cheap advice from so-called experts is more likely to lose money.

Technical analysis help traders purchase and sell stocks on a daily basis, something which is not entirely possible in a mutual fund. Along with profits on shares, individual investors are entitled to dividends on stocks. For more experienced and advanced investors, derivative trading under the futures and options market is possible, which can offer high returns, albeit at a higher risk.

The direct equity route is open for everyone, including short-term, medium-term and long-term investors. However, tax benefits are allowed to first-time equity investors under Section 80CCG (Rajiv Gandhi Equity Savings Scheme) on shares or stocks with a lock-in period of more than a year.

The final decision of choosing the best investment vehicle or between the mutual fund or direct equity routes depends on various factors. For an amateur investor or a new entrant, mutual fund is by far the most reliable tool to enter the financial markets.

Experienced investors, on the other hand, can choose to go directly in the equity market. One of the golden rules of investing is to never put all eggs in the same basket. A perfect investment plan is one that divides the overall investment proportionately. So, there is a case for investors using both the mutual fund and direct equity routes to attain a good investment portfolio.

Adhil Shetty

The writer is CEO of

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