Direct Stocks V/s Mutual funds

Many brave young generation (mostly men I guess) seem to have a view that investing directly in stocks is more profitable than investing in mutual funds. While they are not completely incorrect, it is important to explain a little more before ending the debate.

Let's look at an analogy of a 'dosa walla' who stands by the road making different kinds of dosa. You ask for Plain dosa, Masala dosa, Mysore masala dosa, Rava Dosa, Rawa masala, Plain uttapam, Onion uttapam, etc. and in a jiffy he puts them together for you.

Theoretically, we too can prepare such dishes out of the ingredients he uses and by reading some recipes. But in reality how many people would ever do anything like this? They just don't get it right.

It is years of experience that gives the 'dosa walla' the knack of magically turning out delicious dishes out of the ingredients such as batter, salt, onions, potatoes, oil, spices, etc. try as hard as we may, it is impossible for us to churn out such tasty concoctions.

Now the fund manager of an asset management company too churns out concoctions such as large cap portfolios, mid cap portfolios, etc. out of his ingredients comprising of stocks of different kind of companies.

Now that we have seen that making a 'dosa' itself is quite a challenge, imagine building your own portfolio out of the stocks in the stock market.

Clearly an expert is both significant and necessary.

 

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