Share market is where the stocks of companies get traded. You can directly buy and sell shares of companies you are interested in at the prevailing prices.
Mutual funds pool money from investors like you and me, to invest on our behalf in the share market (also in bonds which give steady interest).
As an investor, some of the main differences for you are:
- With the share market you are on your own. Selecting the best company among the hundreds is your headache. A mutual fund makes this easier with a professional manager for a very small fee.
- Share market trades incur short term capital gains taxes. Mutual fund is more tax efficient.
- You get real time share price for you transaction. With mutual fund, you get the day’s final value (Net Asset Value or NAV).
- You need a demat account for sharer trading. This costs extra and can be easily avoided. Mutual funds require no demat account.
- You must track brokerage cost in share trades. With mutual funds you must track commissions. Go for only direct plan mutual funds as there is no commission involved there.
