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What is the difference between Mutual Fund and Share Market?

Mutual and Share Market, Mutual Funds and Share Market They are one of the most popular investment instruments in the financial market. In this post you will understand Mutual and Share Market What is the difference between

Before investing your hard earned money, you must understand the basic difference between them.

Investing in shares means that you are investing directly in the equity markets, whereas mutual fund investment means that a professional fund manager is investing in equity funds or debt funds for you.

Both types of investments have their own distinct advantages and disadvantages. Read on to know the difference between the two.

Mutual Fund और Share Market में अंतर समझने के लिए Mutual Funds क्या है? इसको समझना जरुरी है। 

What is Shares Market?

Shares represent a portion of the company’s value. When a company wants to get its shares traded on the stock exchanges, it makes an Initial Public Offering (IPO).

The total value of its shares represents the total worth of the company. This means that if you own a share of a company, you own a part of the company.

Let us understand this from the perspective of the company.

Suppose any company wants to raise funds for its business, then it has two options:

  • The company can borrow from a bank.
  • The company offers an IPO, which asks retail investors to invest in its shares, thus raising funds for its business.

types of shares

There are two types of shares, namely –

1 Equity Share | equity shares

These shares are classified as ordinary shares, and they come with an array of benefits for the shareholders, including voting rights, substantial dividends, etc.

Equity shares are issued at face value and are widely traded on the stock exchange.

Some of the major categories of equity shares are as follows –

  • Authorized share capital
  • Paid-up share capital
  • Issued share capital
  • right share
  • Subscribed share capital
  • Bonus share
  • Sweaty equity shares

2 Preference shares

Preference shareholders are given priority over equity shareholders in the event of distribution of dividends and dividends.

However, preference shareholders do not have any such voting rights.

Generally, preference shares are classified on the basis of their structure, dividend pay-out, maturity period, etc.

Following are the common types of preference shares:-

  • Cumulative preference shares
  • convertible preference shares
  • Participating preference shares
  • redeemable preference shares
  • Non-participating preference shares
  • Non-convertible preference shares
  • Non-cumulative preference shares
  • Non-redeemable preference shares

The person investing in the shares is directly responsible for managing it and is required to bear the entire trading cost.

Hence, one must have a proper understanding of the market to make the most of this investment opportunity.

After stocks, it is important for investors to become familiar with the basics of mutual funds in order to more effectively understand the difference between stocks and mutual funds.

हर निवेशक के लिए कई प्रकार के फंड हैं। जानिये म्यूच्यूअल फंड कितने प्रकार के हैं। 

What are mutual funds?

Mutual funds are a mix of stocks and bonds, managed by professional fund managers.

Typically, fund managers are part of an Asset Management Company (AMC) or an investment house. There are two types of mutual funds:

  • Equity Mutual Funds: These include company shares.
  • Debt Mutual Funds: These include government bonds and securities.

Mutual Fund is a diversified basket of shares of various companies. Mutual funds also invest in money market instruments, including participatory notes and treasury bills.

These funds are also invested in gold, real estate and commodities. In short, mutual funds allow you to invest your money in a variety of asset classes.

Difference between Mutual Fund and Share Market:

You can understand the basic difference between stocks and mutual funds from the chart given below:

shares Mutual Funds
definition They represent the ownership of the companies. Investors are like shareholders who hold funds or stocks and earn profits on them
Form of investment direct investment Indirect investment
Diversification At a time, you can buy only one particular share. You can have a diversified portfolio with a one time investment.
objective Part of the company’s growth strategy. Investment option for an individual.
Control over investment You are directly responsible for the choice of stocks. You can choose to trade in or exit the shares as per your choice. Predefined portfolio of stocks. You do not have any control over the investment, nor can you choose to exit any particular stock in the portfolio.
Fixed investment There is no substitute for Fixed Investment as the prices depreciate regularly. You have to constantly monitor the prices. You can invest in fixed monthly Systematic Investment Plan (SIP)
Fees and charges Brokerage charges and other transaction charges. You will have to pay fund management charge, front-end load / back-end load charge, early redemption charge etc.
Growth trajectory can provide quick returns Can provide good returns only in long term; Normally after 5 years.
Returns Long term returns can be up to 14-16% Average returns up to 8%
Investor type Best suited for people with expertise in stock markets. Anyone can invest in mutual funds.
Risk assessment risky investment. Subject to high market volatility. Low market risk.

Benefits of Investing in Shares:

Trading in shares has become easier in the digital age.

You just need to open a demat account with a trading account, complete the KYC formalities, and you are all set to start your share trading journey.

You must remember that whenever you buy shares, it is directly credited to your demat account, whereas the trading account is enabled to be the link between your demat account and bank account.

Benefits of Investing in Mutual Funds:

The main attraction of mutual funds is SIP, which allows you to invest as per your income and provides the benefit of rupee cost averaging.

Where to start mutual fund or share market

Direct investment in shares has a relatively high risk element.

You need to pick a stock by researching the company and the sector it is in.

It is a difficult task to choose a few companies from the thousands of companies listed on the stock exchange. Even then you need to keep track of the performance of each stock.

Stock selection in mutual funds is done by expert fund managers.

You need to track the performance of the fund and not the individual stocks within the fund.

Mutual Funds give you the flexibility to invest with growth/dividend options, top-ups, planned withdrawals/transfers, etc., which are not available in direct stock investments.


Investing in mutual funds or shares depends on your knowledge and expertise in the stock markets. If you want slow and steady income for wealth creation then you can choose mutual funds.

But if you want high returns, and wish to focus on the fundamentals of the stock market, then you should opt for investing in stocks.

If you are looking to trade in shares, remember to choose a reliable financial partner who can provide you with a free online demat account, a single trading platform and the best stock information.

Today investors are increasingly investing in mutual fund units.

Mutual funds have given good returns in the long term. Although stocks are not far behind in this matter.

If you are lacking knowledge and want to invest in equity then you can have a look at equity mutual funds.

This is true for better returns in the long run. At the same time, the risk in mutual funds is less as compared to the stock market.

FAQs on Mutual Fund and Share Market

Which is better mutual funds or shares?

Mutual funds have long term growth trajectory and will give good returns only after 5-7 years whereas stocks you can buy and sell at right time and choose high growth stocks.

What is the difference between stock market and mutual fund?

In short, shares are a part of a company or business. On the other hand, Mutual Funds are instruments through which you can invest in shares of various companies which are listed on the stock exchanges, namely BSE (Bombay Stock Exchange) and NSE (National Stock Exchange)

Are funds better than stocks?

Investing in stocks is generally much riskier than investing in funds and is less likely to guide you down the path to investment success.

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See also  What are Mutual Funds? What is Mutual Funds?


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