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Picking Stocks is Best Left to the Professionals

Updated At: May 23rd 2023

Author:Team Wealthy

You probably won’t like to hear this, but we’ll be blunt about it anyway. For your own good, of course. Investing directly in stocks is not a great idea for most of us.

That’s right. You’ll ask why, since you might have heard stories about how rewarding stock investments have been to someone or the other. However, such cases are few and far between. The stories of people losing their entire life’s earnings in stocks are even more. And scarier, of course.

The success stories you might have heard would be about Rakesh Jhunjhunwala multiplying his money about 82 times with his 13-year investment in Titan. Or about the stock market exploits of Warren Buffett. These stalwarts have, without doubt, been super successful stock market investors. But there’s a reason for that. Three, actually.

1. How do experts make money from stocks?

They spend a lot of time in research: Warren Buffett spends as much as 5 hours every day reading business news and research
They have a diversified portfolio: Rakesh Jhunjhunwala has over 80 stocks in his portfolio
They invest long-term: The average holding period for Mr. Jhunjhunwala is 3.5 years while he has held onto some of his most successful investments for more than 10 years

And let’s not forget the kind of money they have to invest. These are rich blokes who can afford to let a couple of bets go away.

1. How do experts make money from stocks?

Regular people like us, on the other hand, cannot afford to lose any of what we have invested. Most of us work hard to not only earn what we do, but also to save what we do. Saving money to invest every month is not easy, which is why it makes it even more important that we invest in instruments that we can rely upon to deliver.

In case you are struggling to savings then, here's an article that can help you: Track Expenses - How to Know Where Your Money Goes?

2. What is required to invest directly in stocks?

To invest in direct stocks, you need time, knowledge and expertise. Researching companies is a full time job. It requires deep knowledge of the financial world and the kind of expertise that can only come with experience.

On top of that, you also need huge amounts of money to build a diversified portfolio of stocks. And of course, let’s not forget the importance of periodic monitoring of your investments.

2. What is required to invest directly in stocks?

You can do all of this if you’re willing to give up your day job and do just this. On the other hand, you can avail the services of a fund manager whose day job is this--by investing in equity mutual funds.

3. What is the better alternative to direct stocks?

Every equity mutual fund is managed by a professional fund manager and his or her team of research analysts. It is their job to spend time and effort in researching companies. They understand how companies function and the way the stock markets work. They spend huge amounts of time researching and analysing companies to invest in.

3. What is the better alternative to direct stocks?

With equity mutual funds, you also don’t need huge amounts to invest. You can begin investing in a diversified mutual fund with as little as Rs 500. This makes equity funds a better way to gain exposure to the stock markets for most lay investors.

Wondering what are mutual funds? Read here: What is Mutual Fund and Why You Should Care About It?

You might still want to invest in stock market, perhaps just for fun. You can do that, but please dedicate only a small part of your funds to dabble into stocks. Make equity mutual funds the core of your portfolio.