Stock Market VS Mutual Funds Investing - Key Difference - CRED
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10 key differences between stock market & mutual fund investing

10 key differences between stock market & mutual fund investing

a mutual fund is an investment made in fund portfolio that comprises shares & bonds whereas stock market can be used to buy shares of a company listed on stock exchange.
March 29, 2021
8 min read
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difference between stock market & mutual fund investing

Difference between Stock Market & Mutual Fund Investing

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when it comes to investing in equity, many investors struggle to decide between stock markets and mutual fund investing. read this write-up that explains in a brief what key differences are there between the two and which could be a better investment option for you.

understanding the stock market and mutual fund investing

when you directly buy shares of a company listed on the stock exchange, it is stock market investing where you earn profits when you sell shares at a price higher than the purchase price.

when you invest in a mutual fund, you invest in a fund portfolio that comprises shares, bonds, fds, etc., managed by a fund manager.

difference between stock market and mutual fund investing


stock market

mutual fund


more as you invest directly in stocks.

less as you invest in a diversified portfolio comprising 10-15 stocks, bonds, fds etc.


higher the risks, the higher the returns.

consistent returns but not as good as the stock market.


less costly. include brokerage, stt, stamp duty, amc.

costlier. include expense ratio, entry / exit fees,


capital gain tax is chargeable upon selling the shares. no tax deduction is available.

capital gain tax is chargeable on the redemption of the fund. tax deduction of rs. 15 lakhs is available under section 80c of the income tax act, 1961 if you invest in the elss mutual fund.

(you also get a deduction of rs. 1.5 lakhs in a financial year for investment into the ppf account. check ppf calculator, ppf maturity calculator and ppf return calculator to know more.)

investment tenure

investment tenure could be short-term or long-term.

mutual fund investments are usually for long-term returns.


requires frequent watch as it is more volatile.

less monitoring is required as the fund manager manages the fund, and it is less volatile.


to invest in stocks, you need to open a demat and a trading account with a stockbroker.

you can invest in a mutual fund without a demat account, and the process is quite speedy.

asset class

stock market investment is only into stocks.

a mutual fund's diversified portfolio could be a debt-equity, equity-based, gold or hybrid fund where several securities are considered, such as stocks, fds, bonds.

power to make decisions

you can make your own decisions as to when to buy or sell.

here, the fund managers do the needful, and hence you do not have any power with regards to which securities to buy or sell.

research time

more time is required as you need to study and research and then invest.

it takes less time as the fund manager does the work of buying or selling any portfolio security.

the bottom line

investing in the stock market could fetch you higher returns if you already have mastered picking stocks. however, if you want a safer investment option with moderate returns, mutual funds will be the best choice.

check how much you need to invest in a ppf account, its maturity and the return by using ppf calculator, ppf maturity calculator and ppf return calculator.