SIP Investment: Direct investment in shares or mutual funds? Know the complete mathematics of high returns and risk

Best SIP Investment Strategy: To create good wealth in the long term, the biggest question before investors is to invest money in the right place. Is it better to do SIP directly in shares or is it more sensible to invest money through mutual funds? Aditya Shah, founder of Hercules Advisors, says that investing directly in shares in the greed for higher returns is not right for everyone.

According to Shah, at first glance, investing in shares may seem more profitable but the risk in it is also equally big. In contrast, mutual funds offer investors the great benefit of professional management with relatively low risk. Therefore the right decision always depends entirely on the investor’s own age, risk appetite and their individual financial goals.

Direct investment in shares and necessary monitoring

Ramesh, a senior citizen, said that he has invested in shares of companies like ITC Hotels, KIMS and Bharat Electronics (BEL). Strong companies like BEL have shown excellent and strong performance in the last two-three years. However, Shah said that if an investor repeatedly seeks advice on whether to sell or hold shares, then direct equity is not right for him.

Huge risk increasing in just three stocks

Aditya Shah clarified that limiting any investor’s portfolio to only three shares greatly increases the risk. If you invest your money in only a few selected shares, then the fluctuations in the market have a direct impact on your capital. A sharp decline in any one sector or company can have a devastating impact on your entire investment and lifetime earnings.

Mutual fund is a very good option

For investors who cannot track the stock market daily, mutual funds are considered the best and safest investment option. In mutual funds, investors do not have to monitor each company separately because the professional fund managers sitting there do this work themselves. These experts continuously assess the performance of companies and market risk and make changes to the portfolio as needed.

Right investment advice for senior citizens

Aditya Shah believes that senior citizens should keep only ten to twenty percent of their total deposits in equity. People in this age group should always avoid taking too much risk in midcap and smallcap funds as they are prone to huge fluctuations. Instead they should opt for safe flexi cap funds that invest in large stocks so that their money remains safe.

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Choosing the Right Best Flexi Cap Funds

Some good flexi cap funds for investors are also specially mentioned which have great potential to deliver better returns. These mainly include Parag Parikh, HDFC, Helios and Abacus Flexi Cap Funds which can become good options. New funds like Helios and Abacus can give investors much better and safer returns in the future due to their smaller asset base.