Mutual Funds Vs Direct investing

May 4, 2012

Investing directly in the market is better than going to "Mutual Funds" since the mutual funds pay heavily to the mutual fund managers and also pays brokerage to the brokers. The cost of purchase for a mutual fund also goes up since they have to buy huge quantities rather than small lots from the market which significantly influence the price of the share. Information leakage from mutual funds resulting in front running also significantly affects the cost of buying the stock though SEBI and other government bodies trying to prevent it.

There is also a chance to hold some junk stocks. Also if you look at the holding of top mutual funds they hold none other than Nifty stocks which is known to everyone. The timing of the purchase is very important. You can ask that I do not know anything about stocks and will I not burn my fingers if I invest directly. No even people who know everything about stock market lose money. People who does not understand stock market can make more money than people who do.

Pick the top fifty stocks from the nifty and use your common sense to time the market. The best time to buy is when everybody sells. So whenever there is a drop of more than 5% in a single day for a particular stock buy the stock. Also buy one tenth of what you intend to put and keep on buying the nifty stocks and build a corpus for your retirement.

When to exit – When everyone says india is shining and stock markets are the only place to invest get out. Never forget the simple thumb rule BUY WHEN EVERYONE SELLS AND SELL WHEN EVERYONE BUYS.

Look at the returns yourself. Start small and you will be surprised that you are the best investment manager.

Editor: Satish(Name Changed)

Get free updates in your mailbox.