What is difference b/w SIP in Mutual Fund and SIP in direct buying of stocks? I am buying some stocks, but as I don't have a lot of money, I want to buy them every month, is that a good idea?
Check your overall costs. Mutual funds pay very low brokerage and their overall costs including profits cab be as low as 2%. Depending on your broker, demat account charges etc your costs could be higher.
Expertise of manager - he/she will pick /buy /sell stocks probably at better moments. This is the biggest advantage. Mutual funds declare their holdings with a delay of 2 weeks.
No work : SIP can happen automatically at great comfort.
Apart from these you could mimic a fund's portfolio.
@azfara If I'm correct this is a mid cap fund. For such stocks timing is very important because as it is they will have low liquidity, so by the time you see a new stock its price would have already risen. Also churn is high I think in such funds, so stocks go in and out fast and you will still hold on to a stock which manager sold about a month ago.
@azfara SIP in direct stocks means averaging. Unless you understand the reason behind major price fluctuations of a company's stock, you should not invest in it on an automated basis. Say, you started SIP in Nestle. Now, its price has gone down suddenly because of a change in the outlook of its product sales and profits in the future. Whether that is a short-term or a long-term effect, you will have to understand things in more detail, till more facts emerge out. Any more buying / selling should be considered after proper analysis.
In the SIP stock mode, you will just continue buying it regardless of the underlying business changes. This appears to be a suboptimal strategy.
Compare this with SIP in a mutual fund. One, the same above thing is being done by the fund manager on your behalf. If he considers Nestle to be good, he may hold/buy more. Or vice versa. Secondly, you have a diversified portfolio of stocks which prevents a complete loss because of 1/2 companies.
@azfara There is alot of difference ..! first in compare to MF and stock... and second linked with SIP in MF and SIP and Stock.
About first .. if you understand market well and you know the nitty gritty of market definately you can jump and start build your portfolio.
Friend, if you don't know market, you should rely on MF. they are placed well to manage your money. with small brokeage you can sleep well at night.
