your future financially. It enables you to safeguard yourself from inflation and fulfill various goals, from purchase like a house. However, the success of your . If you are torn between or IPOs (Initial Public Offers), understanding each option can enable you to decide the best course of action.
What is the difference between mutual funds and IPOs?
|Points of difference||Mutual funds||IPO (Initial Public Offer)|
|Meaning||A mutual fund company pools money from different investors and, bonds, and other money market instruments.||An Initial Publicfor sale for the first time to institutional, retail, and individual investors. IPOs from investors directly.|
|Purpose||Aaims to invest in underlying assets to generate more capital for the investors. These underlying assets are chosen as per the for equity, debt, and hybrid mutual funds.||Companies mayfor business expansion, loan repayment, etc.|
|Investment method||You can in two ways:|
You do not require a Demat.
|The IPO of a company is listed on the stock exchange and can be bought like any other share. You also require a Demat account to invest in an IPO.|
|Ownership||When you, a specific number of units are allocated to you. You can redeem these units to liquidate your investment at a later stage.||In the case of an IPO, you buy shares of a company and become a shareholder of the company.|
|Investment amount||Mutual funds do not have a price. A SIP can start as low as Rs. 500, and you can invest as per your investment budget.||The issueis decided based on the company’s value and the total number of shares at the time of listing.|
Which one should you choose?
IPOs may carry more risk, and their future performance cannot be ascertained. On the other hand, you can check the past performance and returns of mutual funds. Mutual funds can also be chosen depending on your risk appetite and investment goals. So, they maymore options for different risk profiles. While there is no right or wrong choice here, you can decide based on your unique preference and goal.
To sum it up
These points of difference can help you decide where to invest your money. And if you need more investment options, you can also browse through the Tata Capital.