Written by Upstox Desk
9 min read | Updated on July 31, 2025, 18:25 IST
All You Need to Know About Stocks vs Mutual Funds
Stock Market vs Mutual Fund- An Overview
Mutual Funds vs Stocks: Which Is Better?
Factors to Consider Before Deciding Between Investing in Mutual Funds vs Stocks
Pros and Cons of Investing in Stocks
Pros and Cons of Investing in Mutual Funds
Wrapping Up
Frequently Asked Questions (FAQs)
Upstox is a leading Indian financial services company that offers online trading and investment services in stocks, commodities, currencies, mutual funds, and more. Founded in 2009 and headquartered in Mumbai, Upstox is backed by prominent investors including Ratan Tata, Tiger Global, and Kalaari Capital. It operates under RKSV Securities and is registered with SEBI, NSE, BSE, and other regulatory bodies, ensuring secure and compliant trading experiences.
Investing in stocks or mutual funds is a process that requires your time and effort. Investing correctly is crucial, as it can greatly impact your future. There are pros and cons to both stocks and mutual funds. Stock trading is risky but tends to have a bigger payoff for investors.
On the other hand, mutual funds offer more security but don't typically produce significant gains for investors. There are things you should consider when choosing between stocks and mutual funds for your investment portfolio.
Should you invest in stocks or mutual funds? The answer isn't exactly straightforward. There are a lot of factors to consider, and the following guide will help you decide if you should invest in stocks or mutual funds.
The stock market is a collection of companies listed on the stock exchanges. These companies issue stocks and people can buy them. The price of stocks keeps changing based on supply and demand.
On the other hand, mutual funds are investment options where you pool your money with many other investors' money to buy stocks or bonds. Unlike stocks, where you have to pick individual stocks, mutual funds have professional managers who decide which stocks to buy and sell for you.
You can buy units of mutual funds through a broker or a financial advisor. Mutual funds also come in different types, such as equity-oriented or debt funds. Stocks are shares of companies that trade on stock exchanges like the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE). Each share represents a fractional ownership of the company represented by that stock.
The decision to buy stocks or mutual funds will determine your financial future. The right choice can make all the difference, while the wrong choice can set you back years. However, there are no easy answers to this question.
You must weigh your investment goals against how much time you have until retirement and how much risk you are willing to take on. If you want to invest in individual stocks, you need to have a strong stomach for volatility and be prepared to lose some or all of your money.
On the other hand, if you're looking for a safer long-term investment with growth potential, then mutual funds can be an excellent choice. To facilitate the decision-making process, you can ask yourself the below questions:
Here are some factors that can help you decide which investment vehicle is best for you in the ongoing debate of mutual funds vs stocks in India:
Both stocks and mutual funds are risky assets. But the level of risk varies between them. Mutual funds are considered safer than stocks because they have diversified portfolios and professional management.
However, even a well-diversified mutual fund can lose value if the market turns down. On the other hand, individual stocks carry higher risks than mutual funds because they are not diversified. If you buy individual stocks and hold them for a long time, you can lose everything if one company fails.
Mutual funds are more liquid than stocks because they can be sold at any time without paying any brokerage fee or commission as long as there is no lock-in period for the particular fund you have invested in.
Also, there is no minimum amount required to invest in a mutual fund compared to an individual stock, where you may have to buy large quantities of shares to make meaningful returns on your investment.
What is your time horizon? How long do you plan on holding onto your investment?
If it's less than five years, then mutual funds might be better because they can cost less and will help you avoid paying taxes on gains every year. If it's more than five years, buying stocks could make sense since they have higher potential returns over time.
Mutual funds typically have more tax-advantaged features than individual stocks do. Stock dividends and long-term capital gains may be taxed at a lower rate than ordinary income, but only if certain conditions are met (and even then, it's still possible for investors to face higher taxes).
Meanwhile, many mutual funds allow investors to defer capital gains taxes indefinitely by reinvesting all distributions into the fund itself — which isn't possible with individual stocks (unless an investor holds them until death).
Stocks provide a direct ownership stake in a company. If the company is doing well, so are you — and vice versa. But stocks are volatile, too, so they aren't suitable for every investor.
Mutual funds can offer investors a way to spread their money among different types of investments without having to do it themselves by trading individual stocks or bonds.
The choice between stocks and mutual funds is a personal one. It depends on your investment goals, risk tolerance, and time horizon. By thinking carefully about these factors, you can find an investment strategy that provides solid returns without too much risk. Hence, you determine the result through mutual funds vs stock returns.
Stocks are financial instruments that represent partial ownership of a company. A stock represents part of the company's assets and earnings, which means you're entitled to a slice of the pie — the company's profits, dividends, and growth.
You can buy, sell and trade stocks in a variety of ways. You can purchase them directly from an individual or through an exchange.
The fund manager chooses which companies to invest in and how much money to put into each based on their research and experience. Mutual funds often have lower fees than individual stocks because there's no need for an expensive sales force — people can buy or sell shares directly through their broker without paying commission fees for advice or assistance.
The price of a stock represents how much investors are willing to pay for the company's profits (dividends). The amount investors pay per share is called its "price-to-earnings ratio" (P/E). A high P/E ratio means investors pay more for each dollar of profit than they would with stocks that have lower P/Es.
The expense ratio is one of the most important factors when choosing a mutual fund. It measures how much the fund management company charges for operating the fund, expressed as a percentage of your investment.
This number is calculated by taking all of the expenses incurred by a mutual fund and dividing them by the total assets in the fund. The higher this number, the more you'll pay for investing in that mutual fund.
About Author
Upstox Desk
Upstox Desk
Team of expert writers dedicated to providing insightful and comprehensive coverage on stock markets, economic trends, commodities, business developments, and personal finance. With a passion for delivering valuable information, the team strives to keep readers informed about the latest trends and developments in the financial world.
Read more from Upstox