Investing in confusing as well as complicated. People are interested to learn about the various investment options they can use to increase their wealth and save taxes. There are so many investments options such as stocks, mutual funds, real estate, and money markets, it can be tricky to choose the right option for yourself. 

Those who are new to investing look for an easy answer on which is better: mutual funds or stocks? Both stocks and mutual funds offer various benefits for investors. Determining which fits best for you depends upon your financial goals, risk-taking capability, and income level.

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Here is a comparison to help you to decide what is the best option for you:

Understanding of stocks and mutual funds

Mutual funds are very less risky than Stocks. In mutual funds, money is divided into various options. Before investing in stocks you need to do extensive research. In mutual funds, the research is done by professional fund managers who are responsible for managing the pool of investment.

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Mutual funds offer investors a greatly diversified portfolio as investors can invest a small amount of money into one or more funds and access a diverse pool of investment options. You invest in a mutual fund that invests in as many as 20 to 30 different securities. In the stock market, you need to invest much more capital to get the same results.

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Time & Research

If you are a beginner it is recommended to start with mutual funds so that you can get familiar with the market. In mutual funds, decisions are made by highly experienced fund managers. When managers are doing the market research you can be passive but if you invest in stocks you have to continuously track the market and analyze your investments.

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Potential Risk

Mutual funds reduce the risk by diversifying an investment across a portfolio. On the other hand, stocks are vulnerable to market conditions, and the performance of one stock can’t compensate for another.

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Tax benefits

With mutual funds, you can claim tax benefits under Section 80CCG as well as 80C if you have an equity-linked savings scheme. On the other hand, if you sell your stock holding within a year from the purchase date, you will have to pay short-term capital gains tax at the rate of 15%.