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Financial Planner - Answered on Feb 20, 2024

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Asked by Anonymous - Feb 19, 2024Hindi

What can give better returns in the long run? Investing in MF SIPs or investing in stock SIPs? I would like to invest Rs 60,000 each every month in stocks as well as MFs directly.

Ans: Deciding between investing in Mutual Fund Systematic Investment Plans (SIPs) and Stock Systematic Investment Plans depends on various factors including your risk tolerance, investment goals, time horizon, and knowledge of the stock market.

Here are some considerations for both options:

Mutual Fund SIPs:

• Diversification: Mutual funds offer diversification across a range of stocks or other assets, reducing the risk compared to investing in individual stocks.
• Professional Management: Mutual funds are managed by professional fund managers who make investment decisions on your behalf, based on their research and expertise.
• Accessibility: Mutual funds are accessible to investors with varying levels of knowledge and experience in the stock market.
• Lower Risk: Generally, mutual funds are considered lower risk compared to individual stocks due to diversification.

Stock SIPs:

• Potential for Higher Returns: Investing directly in stocks can offer higher returns if you pick the right stocks. Some individual stocks have the potential for significant growth over time.
• Control: With stock SIPs, you have more control over your investment decisions and can choose which stocks to invest in based on your own research and analysis.
• Higher Risk: Investing directly in stocks carries higher risk compared to mutual funds due to lack of diversification. If you choose poorly performing stocks, your portfolio may suffer.
• Requires Research and Monitoring: Investing in individual stocks requires a good understanding of the companies you're investing in and regular monitoring of their performance.

Decision:

Considering your investment amount of Rs 60,000 each per month in both stocks and mutual funds, you could consider a hybrid approach:

• Allocate a portion of your investment towards mutual fund SIPs for diversification and lower risk.
• Allocate the remaining portion towards stock SIPs if you're willing to take on higher risk for potentially higher returns and have the time and knowledge to research and monitor individual stocks.

It's also advisable to consult with a financial advisor who can assess your individual financial situation and help you create a personalised investment plan tailored to your goals and risk tolerance. Additionally, past performance of investments is not indicative of future results, so make sure to consider all factors before making your decision.

DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Users are advised to pursue the information provided by the rediffGURU only as a source of information to be as a point of reference and to rely on their own judgement when making a decision.