Mutual Funds vs. Direct Stocks: Which is Better for You?

Introduction

Two main ways to invest in the market are buying shares directly or buying units of a Mutual Fund.

Direct Stocks

You buy shares of specific companies (e.g., Grameenphone, Square Pharma).

Related: Investing in Dhaka Stock Exchange: A Beginner's Guide

• Pros: Higher potential returns. You have full control.
• Cons: High risk. Requires time and knowledge to research.
• Best For: Experienced investors who can analyze financial reports.

Mutual Funds

Your money is pooled with other investors and managed by a professional Fund Manager.

• Pros: Professional management. Diversification (one unit holds many stocks). Lower risk.
• Cons: Management fees. Returns might be average.
• Best For: Beginners and busy professionals who don't have time to track the market.

SIP (Systematic Investment Plan)

Many mutual funds in Bangladesh (like IDLC SIP) allow you to invest small amounts (e.g., ?3,000) monthly. This is a great way to build discipline.

Conclusion

If you are new, start with a Mutual Fund or SIP. As you learn more, you can allocate some capital to direct stocks.