Investing in Mutual Funds versus directly in shares

3 MinsMar 6, 2023

Investing in the stock market has always been a popular choice among investors looking to grow their wealth over the long term. However, it is difficult to choose between the two most popular investment options - shares and mutual funds. In this blog, we will discuss the differences between the two and help you make an informed decision about where you should invest.

Investing in Mutual Funds versus directly in shares

What are shares?

shares represent ownership in a publicly traded company. A shareholder gets a portion of the company's profits and a say in its decision-making through voting rights. When an investor buys shares in a company, they essentially become the shareholder and are entitled to a portion of the company's profits and assets. The price of shares is determined by supply and demand in the market, and investors buy and sell shares on a stock exchange or through the over-the-counter market.

What are mutual funds?

mutual funds are a type of investment vehicle that pools money from many investors to purchase securities. The fund is managed by professional fund managers who make investment decisions on behalf of the fund's investors. mutual funds diversify investments across a range of securities to minimise risk, and the pricing is determined by the Net Asset Value (NAV) of the fund's underlying securities.

In terms of mutual funds, Equity-Linked Savings Schemes (ELSS) are a popular option for investors looking for tax savings and capital appreciation. ELSS mutual funds invest primarily in equity stocks and are eligible for tax benefits under Section 80C of the Indian Income Tax Act. Additionally, ELSS funds have a lock-in period of 3 years, which can provide added discipline for long-term investment. Axis Long Term Equity Fund is an ELSS that offers an astounding growth rate of 17% while providing substantial tax benefits.

Difference between mutual funds and shares

The following table summarises the differences between mutual funds and shares:

Mutual FundsShares
A type of investment vehicle that pools money from many investors to purchase securities.Represent ownership in a publicly traded company, giving the holder a portion of the company's profits and a say in its management through voting rights.
Managed by a professional fund manager who makes investment decisions on behalf of the fund's investors.Individual investors buy and sell shares through a stock exchange or over-the-counter market.
Typically diversifies investments across a range of securities to spread risk.Usually focuses on a single company, adding to the investment risk.
Pricing is determined by the net asset value of the fund's underlying securities.Pricing is determined by supply and demand in the market.
Returns are influenced by the performance of the securities the fund invests in.Returns are influenced by the financial performance and market perception of the underlying company.
Often come with management fees, which reduce returns for the investor.No management fees, but investors may pay brokerage fees for buying and selling shares.

Also Read: [Who should opt for Mutual Funds?]

Is Mutual Fund better than Stocks?

The decision between investing in mutual funds versus stocks depends on several factors, including an individual's investment goals, risk tolerance and financial situation.

Situation 1: When mutual funds are better:

  • For novice investors with limited knowledge of the stock market, mutual funds can be a better option. The professional management offered by mutual funds can help inexperienced investors to diversify their portfolios and potentially enhance returns.
  • For investors with low risk tolerance and those looking for more stability, mutual funds  (via SIP/STP mode) are a naturally better option. The diversification offered by mutual funds can help to reduce risk. Moreover, the option to invest through Systematic Investment Plans (SIPs) can provide a more stable investment strategy.

You can use Axis Bank's SIP calculator to estimate the amount of money you will need to invest each month to reach your desired investment goals. The calculator takes into account factors such as investment amount, expected returns and investment period.

Situation 2: When shares are better:

  • For experienced investors with a good understanding of the stock market and those comfortable with higher risk, investing directly in shares may be a better option. The ability to choose specific stocks and have more control over investment decisions can lead to higher returns if the individual has the expertise to make informed investment decisions.
  • For investors with a long-term investment horizon, stocks may also be a better option. Stocks have the potential to offer higher returns over the long term, particularly if the underlying companies perform well. Additionally, investing directly in shares eliminates the management fees associated with mutual funds, which can reduce returns for investors.

The amount you should allocate to mutual funds as part of your overall investment portfolio depends on your financial goals and risk appetite. As a general rule of thumb, it is recommended to have a diversified portfolio that includes a mix of stocks, bonds and other assets. mutual funds can be a valuable component of this diversified portfolio, but it is important to consider specific funds and their investment strategies before making any investment decisions.


In conclusion, investing in mutual funds or directly in shares is a personal decision that should be based on your financial goals, risk tolerance, investment style and knowledge of stock market. If you choose to invest in mutual funds, Axis Bank can help you get started with ease. Axis Bank offers a wide range of mutual fund options from top fund houses, making it easy for you to choose the right funds to meet your investment goals.

Additionally, with Axis Bank's online platform, you can invest in mutual funds quickly and conveniently. Whether you are a first-time investor or a seasoned investor, the platform provides you with all the tools and information you need to make informed investment decisions. Moreover, with a dedicated customer support team, you can have your concerns addressed every step of the way.

Start investing in mutual funds today and watch your wealth grow with Axis Bank.

Disclaimer: This article is for information purpose only. The views expressed in this article are personal and do not necessarily constitute the views of Axis Bank Ltd. and its employees. Axis Bank Ltd. and/or the author shall not be responsible for any direct / indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information. Please consult your financial advisor before making any financial decision

Mutual Fund investments are subject to market risk, read all scheme related documents carefully. Axis Bank Ltd is acting as an AMFI registered MF Distributor (ARN code: ARN-0019). Purchase of Mutual Funds by Axis Bank’s customer is purely voluntary and not linked to availment of any other facility from the Bank. *T&C apply