Which one is the best among share market and mutual funds in 2022?
What is share market?
It is a market or we can say it is such a platform where the buyers and sellers come together to do trade and business on the listed shares for a specific period of time in a day. Share market is also called as stock market. Even though there is a slight difference between the two of them. In the case of Share market we are only talking about the buying and selling of Shares but in the case of stock market it means the trade of different types of financial securities like bonds, forex, derivatives, etc.
In India the main stock exchange are:- Bombay stock exchange (BSE) and National Stock Exchange (NSE).
Other than this there are many other stock exchange are there:- Calcutta stock exchange, National stock exchange of India, National commodity exchange of India, Multi Commodity Exchange of India, India Commodity exchange, India international exchange, Metropolitan Stock Exchange of India and NSE IFSC.
Types of Share Markets
To Know about the minute things about share market is not enough. We should also know about the types of Shares.
There are mainly two types of Share market is there:-
- Primary Market
- Secondary Market.
So let’s begin with the first one-
1) Primary Market:- It means that when a company which is new in the market gets registered itself to raise money by issuing some particular amount of money at the stock exchange. It is known as Primary Market.
If any new company is coming in the market and selling it’s shares for the first time then that is known as Initial Public Offering (IPO).
2) Secondary Market:- In secondary market when any newly formed company has sold it’s new securities in the primary market once then after that they can be traded in the secondary market.
So, now when it is traded in secondary market then by this the investors get a chance for buying and selling the shares among themselves at the prevailing market price.
Traded on the Share Market
There are four types of financial instruments traded on the Share Market are as follows:-
1)Shares:- It is a kind of certificate which makes you also the ownership of a corporation. A shareholder of any company also becomes a deserving candidate of getting a Share of profit also, if earned by the company. In the same manner they also have to bear the loss of the company also.
2)Bonds:- When any company needs to raise it funds then many times it issues bonds to the public and in exchange of that collects money from the public. It is known as the loan which is taken by the company from the public. People who purchase these bonds become the creditors of the company and Start getting regular interest on the amount they have invested, in form of coupons .
3)Mutual fund:- It is something which means something like this “mutual” word means any action which is done by two people who have agreed to do a work together. Whereas “fund” simply means money. Now, mutual fund means when two parties agree to collect and invest an amount of money to earn profit.
4)Derivatives:- It means that the value of financial securities likes share keep on fluctuating. So maximum time it becomes very difficult to fix a price.
Derivatives are such kind of instruments which helps the investors at this kind of situation to do trade in the future at the same price which has been fixed by them today.
What is mutual fund?
It is a pool of investors where there are a large numbers of investors invest a certain amount of money to get back a good return or profit on the amount they are investing after a particular period of time. This whole amount of money is managed by an investment professional who are known as fund manager. They are responsible to invest the whole amount in different kind of securities like bonds, stock, and other type of assets to get a good return of it. The profit or loss is beared collectively by all the investors of the fund.
What is the difference between share market and mutual fund?
Share market means that you are directly investing in equity shares. You are responsible for your investment management. Whereas mutual fund means that a professional investor invests you amount of money in the equity fund. They are responsible for both the profit or loss out of that particular amount of money. In both the form of investment they have different kinds of advantages and disadvantages.
Shares Market It shows a part of company’s value. It shows that if you own shares of a company then you are also an owner of the company.
If the company wants to raise fund then it has two options:-
• It can borrow from the bank.
•It offers it’s shares to be purchased by the public or investors to raise funds for the business.
Mutual fund means where a professional investor manages the amount of the investor and invest it in different stock market, bonds, etc.
It has two types:-
• Equity Mutual funds
• Debt Mutual funds
Difference between share market and mutual funds
• Form of investment:– In shares the investment is direct whereas in mutual fund it is indirect.
• Objective:- In share market the objective is company’s growth. Whereas the objective is the investment of an individual.
• Returns:- In share market the returns are of long term which is between 14-16% . Whereas in mutual fund an average return is get which is up to 8%.
• Risk Assessment:- In the case of Share market it is subject to high market volatility. In mutual fund it is fewer to market risk.
• Investor Type:- In share market it is for the people who have experience in stock market. Whereas in mutual fund anyone can invest.
Benefits of Share Market
There are many benefits of investing in the Share market. The Benefits are listed below:-
- It is good for long term returns of Benefits
- Dividend of income
- Diversification of Benefits and Liquidity both
- By purchasing shares shows the ownership in a company.
- Transparency
Benefits of mutual fund
There are many benefits of mutual funds. Some of them are listed below:-
- Liquidity
- Diversification
- Flexibility of investment in small amounts
- Safety and Transparency
- Lowe cost
- Best for the tax Saving Option
- Lowest tax on the profits
Conclusions
So in this article we have tried to explain you in a detailed manner about the Share Market and mutual funds. Now we hope that you have a clear view and knowledge about share market and mutual fund and can decide which would be better way for you for investment.
