From my brief three year stint in the Equity Market - MFs win hands down. I've made a lot of money in Stocks - some big gainers were Infosys, I-Flex, SRF and Tata Teleservices (to some extent). But some bigger losers were Gujarat NRE Coke, Arvind Remedies (atleast as a percentage of Investment) and Bongaigaon Refinery. Overall in three years of spending hours buying and selling shares, I'm almost dead even when really the Market has almost trebled. And the only one who's gotten rich from this is the ICICI Company and its Shareholders of which I am also one since I have about 10 shares of ICICI Bank. But unfortunately of the thousands of rupees I might have lost as brokerage to ICICI, I might have ended getting one rupee back.
Am I really that bad at Stocks? The truth is I am. I still don't know how to read a financial statement. Most of my buys are based on gossips in the News Columns spread by experts with vested interests or just gut feel about a company's value based on past history. Some of the shares have been really lucky for me in the sense that my gut feel decisions have worked out.
I had a short stint with the Derivatives Market early last year; but burnt way too much money on one tragic day to continue. I decided that I would learn more about it and come back. Still haven't gotten the time to do so.
So some time late last year, I decided that enough is enough. Stocks are not what I am made for. Mutual Funds is the way to go. Atleast there are some experts managing my money for me. And these experts will do better than this amateur gambler. In the last six months, I've had returns of about 12 percent which translates into 24% per annum. I know the true test is in the long term return on investment. But it is looking good so far.
Another powerful tool that I just started using is the use of SIP (Systemic Investment Plan) where you invest a fixed amount in a Mutual Fund on a recurring basis (Monthly/Semi-Annually/Annually). The best part about this is that the only thing you need to ensure is that the amount is there to be invested and that I do whenever I get my salary by allocating that amount. There is no question of timing the market and this will ensure that your investments grow along with atleast near the average growth of the Market.
And since the Indian markets are booming, hopefully my investments too will. Atleast so far my Mutual Fund Investments are far outperforming the Stocks Investments over the last few months.