What is the difference between Mutual Funds and Shares?

As the stock market increases, people's interest in equities is increasing. However, the big question is whether young investors should invest directly in stocks or mutual funds. Here are some reasons why mutual funds have a slight edge over stocks in terms of investment under individual rationale. In this blog, we will discuss the difference between Mutual funds and shares. Before discussing the difference between Mutual Funds and Shares, let us first know what is Shares and What is Mutual Funds?

What are Shares?

Shares mean a share in the share capital of the company. The small units of a company's share capital reflect their value and are generally traded on the stock market. Shares are also called equities or stocks. When a company is looking to get additional funds for their business, they trade their shares in stock markets by offering an Initial Public Offering.

After Initial Public Offer, the company gets listed on the stock exchange and is available to all investors. When the company performs well in its business and grows, the value of its shares also increases. So, if an investor holds shares long-term, they will generate a good profit by selling them.

What are Mutual Funds?

A mutual fund is a professionally managed portfolio of-

  • Stocks,
  • Bonds and

Other income structures are devoted to a particular investment strategy or asset class. When investors buy shares in the fund, the mutual fund company pools that money to make investments on their behalf.

Difference Between Mutual Funds and Shares

When investing money, people keep all kinds of options in mind. He also considers investing in the stock market and keeps mutual funds in mind. The question arises that if you want to choose between shares and a mutual fund, then what to choose? Invest in the share market, or is it better to invest in mutual funds? Let us know the point of difference between Mutual Funds and Shares.

Investing Cost

Investing in mutual funds requires some costs because an investor has to pay different charges like load fee, expense ratio, and more. On the other hand, an investor looking to invest in the stock market has to pay the fees for opening their brokerage account. This includes opening account charges along with annual maintenance charges. In simple words, we can say multiple costs are involved, such as stamp duty, brokerage fees, and more.

So, if you as an investor are looking to see the difference between shares and mutual funds, you will find that cost of investing in shares is low compared to mutual funds.

Investing as a Beginner

If you are a new investor with little or no experience in the financial markets, it is advisable to start with mutual funds because the risk is comparatively low and because an expert makes the decisions. Moreover, these professionals have the insight to analyze and interpret financial data to measure potential investment outlooks. At the same time, this is not the case with Shares.


Multibagger returns on the proper stock selection

Investors should understand that if you invest in the stock market on your own, you can get multi-bagger returns if you pick the right stock. But, mutual funds will not give you multi-bagger returns in such a short period. However, it should also be remembered that self-investment can reduce your investment manifold. This is not the case with mutual funds. In simple words, more risk is associated with higher returns with self-investing. Mutual funds assure balanced returns as well as balanced risk.

Goal-based investing

Financial experts say that mutual funds are goal-oriented investments. In this, you know how much return you will get annually. It proves to be a multibagger in the long run. You don't need to be active after investing in it. When investing in the market on your own, updated information about that stock and sector is essential. If you do trading in the stock market or want to understand its nuances, then the way of investing can be learned with time. Financial experts recommend investing in the market on their own only after taking experience.

Portfolio Diversification

Financial experts advise always keeping the portfolio diversified. This keeps the risk low. Keeping the portfolio diversified reduces the risk factor. Any movement in the market has little impact on your investment. When an individual invests in a particular share of a specific sector, then his risk will be high. In mutual funds, your money is invested in different stocks of different sectors. In this way, the benefit of stock diversification is also available along with sector diversification.

Below mentioned are the point of difference between Mutual Funds and Shares-

Point of Difference Mutual Funds




Form of investment Indirect investment Direct investment
Diversification You can have a diversified portfolio with a one-time investment. At a time, you can only buy a particular share.
Objective Investment option for an individual. Part of the company's growth strategy
Control over investment Predefined portfolio of shares. You have no control over the investment, nor can you choose to exit a particular stock in the portfolio. You are directly responsible for the choice of shares. You can choose to trade or exit the shares as per your choice.
Fixed investment You can invest in a fixed monthly Systematic Investment Plan (SIP). Fixed investment is not an option for fixed investment as the prices fluctuate regularly. You have to constantly monitor the prices.
Fees and charges Fund management charges, front-end load/back-end load charges, early redemption charges, etc. Brokerage charges, and other transaction charges.
Returns The Average return of is up to 8%. The Long term returns can be up to 14-16%.
Investor type Anyone can invest in mutual funds. Best suited for people specializing in the stock markets.
A growth trajectory Can only provide good returns in the long term; Usually after 5 years. Can provide quick returns
Risk assessment low market risk. Risky investments. Subject to high market volatility.


Investing in mutual funds or shares depends on your knowledge and expertise in the stock markets. If you want a slow and steady income for wealth creation, then you can choose mutual funds. But if you want high returns and focus on the fundamentals of the stock market, you should decide to invest in stocks. If you're going to trade in stocks, remember to choose a reliable financial partner who can provide you with a free online Demat account, a single trading platform, and the best stock information. Today investors are increasingly investing in mutual fund units. This is because mutual funds have given good returns in the long term. However, the shares are not far behind in this matter either. If you lack information and want to invest in equities, you can look at Equity Mutual Funds. This is perfect for better returns in the long run. Whereas, the risk in mutual funds is less compared to the stock market.

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