Mutual Funds vs stocks: Which is better for higher returns in long term — explained

Mutual funds vs stocks: Investing in equity mutual funds for long term is preferred over other investment tools like Public Provident Fund (PPF), Post Office and other small saving schemes because it beats inflation growth with ease. However, if someone is looking for multibagger return on one’s money in long term, then choosing mutual funds may jeopardize one’s investment goal. For such investors, it becomes highly tricky whether they should go for direct stock market or they should continue investing in mutual funds as asset managers of one’s AMC are more adept in finding value picks than the investor himself.

On which is better investment tool in between mutual funds and stocks, investment advisor Manish Goel writes on his website — — “Mutual Funds have no history of giving Multibagger returns in four years. After factoring in high inflation in India, real returns by mutual funds are just 5 per cent to 10 per cent per year. Biggest wealth in India in the next 5 years (2023-2027) will be made through Quality Long Term Equity Investments. ” Manish Goel went on to write that only money is not important. One should have time to enjoy that money as well and hence he advised investors to invest in stock market as it gives higher return than mutual funds.

However, every time you invest in a stock and hold for long won’t yield higher than mutual funds yield. For that, you need some investment strategy.

On how to find a quality pick that can yield higher than equity mutual funds in long term, Manish Goel writes, “Always invest according to fair value of a share. Always find out what is fair value of a share and then if the share is trading at less than its fair value, then buy it and if the share is trading above its fair value, then sell it.”

On how to decided fair value of a stock, Sandeep Pandey, Director at Basav Capital said, “The fair value of a stock is decided on five basic parameters — intrinsic value, price to book ratio, price to earning ratio, dividend yield and PEG ratio. If a stock comes good on these five parameters, then one can assume that fair value of a stock is below its current market price (CMP) and is suitable for adding in one’s portfolio.”

Manish Goel stock to buy

On how an unknown stock can end your search for a value pick, Manish Goel has written on his Facebook wall, “Analysis of Global Education Results — In 9 months of FY 2022-23, Global posted profit of ₹12.75 crores… Extrapolation of this in yearly terms becomes ₹17 crores… Net worth of the company on ₹31.03.2022 was ₹47 crores…. So, Return on Equity (RoE) in this year becomes 36 per cent!!! this is extremely good and better RoE than Infosys, Reliance and HDFC Bank. Icing on the cake is that cash flow situation in December 2022 quarter… Further 2-3 new subsidiaries are formed and profit from those subsidiaries will come in next quarters.”

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