Are you confused? Indian mutual funds vs direct investment in stocks market
I'll start with a few questions
1. The best Indian mutual funds companies are rolling out attractive mutual fund schemes in the SIP mode, why the sudden shift from promoting lump sum investment in mutual funds to the already existing SIPs???

2. Is it better to invest a lump sum in these mutual fund companies or do some systematic investment planning in a monthly investment from your savings??
I think these mutual fund companies want to confuse you further so that you choose between the two options and they get to lay their hands on your money and the three year lock in period( or is it going to be 5 years lock in period?) will ensure that they can enjoy the investors money, pay their employees and after the lock in period is over and the investor redeems his money levy another 5- 10 % for premature redemption. I think it is  winning proposition for the mutual fund companies and a costly learning lesson for the poor investor.

The government and the regulatory bodies wanted to encourage the salaried class to invest in the equity market and therefore they gave tax exemption for investment in ELSS  funds so that investors invested with these mutual fund managers, secure in the knowledge that their money would grow in the competent hands of these financial whiz kids.

If you have invested in these mutual fund schemes year after year for three years or more you will realize that the returns promised have not been delivered. Journal of Finance claims that   out of 30 highly rated mutual fund schemes, 20 gave less than 5% returns This is less than a bank FD.So, the best thing to do would be to cut your losses and take charge of your investments. Take consolation in the fact that you saved on taxes at least. First thing to do would be to open your de- mat account  and start buying potential blue chip stocks and multi bagger stocks directly from the comfort of your home or office month after month if you want to do it the SIP way or a lump sum investment every year. The DTC is becoming effective in 2012 and the tax exemption on ELSS is being lifted wef April 2012. So the hint from the government is clear and the message is to follow the direct investment strategy in the equity market.  No need to panic. Discover the need to  invest long term in a diversified equity portfolio and  go through this post on multibaggers.

Indian mutual funds, blue chip stocks

‘It is safe to invest through mutual funds’ is what the mutual fund managers will have you believe. If you believe them and hand over your money they will invest your money in shares, bonds or other securities. But that does not guarantee you a profitable return. If you do not get a handsome return on your investment why should you invest in mutual fund schemes?

Stock based equity schemes that do well can even out do the Sensex but the harsh ground reality is that most of the mutual fund schemes have underperformed their bench marks. It simply means that when compared to the Sensex the mutual fund companies have cut a sorry figure.

On the other hand so many equity stocks in the stock market have given far better returns than the best mutual fund companies.

Selecting stocks is not so hard provided you are willing to put in the effort. But then there is a way out for those who feel it is beyond them. All you need to do is to open a de-mat account and start investing regularly in the stock market by buying a scrip every month based on the advice of an expert. In a year’s time you will have a diversified portfolio of potential blue chip stocks. Those stocks that you purchased in the first few months would have already started gaining in value. What you hold may be one and a half times or double the value of what you invested. Now you can sell 50% of the profitable ones and buy more of another potential blue chip stock. Your profits and regular investment will see to it that your investment is broad based and instant liquidity is an option to mitigate losses if any. Well, shall we listen to what a passive investor has to say about the benefits of long term investment and its benefits?

 It an amazing story of how an investment of 15000 can actually grow to 11,00, 000 in less than ten years. The investor did nothing after investing in the stock but it is likely that he invested in similar potential multi baggers stock which was cheap then but after 10 years has grown in outstanding fashion. Click here and see for yourself.
And what do you do when instead of growth there is a fall in price? Well, you do nothing and stay invested, the stock market scenario is such that after correction the prices of performing companies will start to soar again. But what happens is a lot of people panic and liquidate their stocks and approach the mutual fund managers and leave it in their 'expert' hands with disastrous consequences.