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Should You Invest in Equity Shares Directly Instead of Mutual Funds?

Who and when should one invest / consider investing in Equity Shares directly than investing in Equity Mutual Funds?

Investing in Equity Mutual Funds for all Long Term Goals is the simplest and the easiest way. Some argue, investing in Equity as an asset class and not necessarily Equity Mutual Funds for Long Term Goals. However, that may be suitable only for the those who wish invest with dedication, on time and knowledge to learn and master Direct Equity Investing.

If you are one of those who is willing to dedicate to patient & continuous learning, research & analysis, you may look for Direct Investing in Equity Shares. Be a long term investor and not a trader. Learn to create a focused portfolio of select few high quality  stocks, that you expect to be multi-baggers (increase in value multi-fold) over long term. As this is difficult task and involves far higher risk than Investing in Equity Mutual Funds, don’t use it for funding your regular / time bound goals. Don’t invest large sums of money until you learn and experience through couple of market cycles over 7-8 years. During this time keep measuring the performance of your portfolio against suitable benchmark and few mutual fund schemes in that category. If you are fairly beating the performance of category average of mutual funds, over different situations (bull and bear phases), you may consider betting big sum on your investment strategy.

The basic idea here is to take concentrated exposure to few select, high quality stocks (chosen with high conviction after thoughtful study & analysis based on years of learning and experience) which usually an Equity Mutual Fund would not invest in or invest sufficiently because of the constraints it will have.

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