Don’t look at top stocks to buy! The real question is – should you invest in stocks directly at all?

S

hould you invest in stocks directly at all?

For most people, the real question isn’t “which share to buy” but “should I be buying shares at all?”

Let’s start with a familiar face.Meet Pranit, 34, salaried, living in a metro city. He leaves home around 8.30 in the morning, fights traffic, spends the day in meetings, and somehow makes it back home by 7.30 in the evening. There’s a young child to play with, parents to look after, a few pending chores, and maybe two-three hours a week he can honestly spare for his money.In that time, he does what most people do – checks stock prices on his phone between meetings, forwards and receives “hot tips” on WhatsApp, and watches a couple of YouTube videos on the weekend.Now think of the person on the other side of Ankit’s trade. She’s a full-time fund manager or analyst. Her entire day, 8-10 hours, is spent tracking businesses, meeting managements, reading annual reports, regulations, sector reports and data. She has a research team, a risk team, and her performance is reviewed every quarter in cold numbers.Now ask yourself: who is the stock market really stacked in favour of?Most people who ask “Which stock should I buy?” should first be asking, “Should I be buying individual stocks directly at all?” At Value Research, whenever we see portfolios stuffed with random shares, this is usually the first honest conversation we end up having.

The three things direct stocks demand

Direct stock investing is not “mutual funds DIY”. It demands three things together, not one-by-one.

1. Time

Good stock-picking is not about staring at the price ticker. It’s about understanding the business behind that ticker.That means reading annual reports, tracking quarterly results, following regulations and competition, watching management behaviour, and staying updated with what’s happening in that sector. For one company, this is still manageable. For 10-15 companies, it is a part-time second job.Over the last 10 years, the Nifty 50 TRI has delivered around 14 per year with almost zero effort from the investor once the money is invested. To just match that by picking your own stocks, you have to put in not only money but also hours every week, year after year.In our work with investors through Value Research Fund Advisor (VRFA), we see the ground reality very clearly: most salaried people simply don’t have this kind of time. Between office, commute, family and health, expecting them to compete with full-time professionals on stock-picking is unrealistic.

2. Temperament

If time is the entry ticket, temperament is the real eligibility.Markets correct by 10 per cent or more roughly once every 2 years. Individual stocks can fall 50 per cent in a single month because of a bad result, a rumour, or a global scare. What you do in those moments decides your long-term return.When we look at real-life portfolios at Value Research, the pattern is painfully familiar:

It’s not that investors don’t manage to buy good companies. The problem is that they don’t stay with them. A 30-40 per cent fall in price suddenly turns a “great story” into a “

yeh galti ho gayi

” stock.A SEBI study on derivatives showed that about 93 per cent of active traders lost money over a year. That study was on F&O, but the disease is the same in cash markets too – behaviour, not stock selection on paper.This is one big reason we like mutual funds for the majority of people. A diversified equity fund builds in a layer of discipline. In VRFA, we see far fewer panic redemptions from a good equity fund compared to a single stock that is suddenly deep in the red.

3. Skill

The third requirement is skill.Reading financial statements, understanding cash flows, judging management integrity, comparing one sector with another, valuing a business – none of this is “philosophy”, but it does take learning and practice.Most investors don’t have the time or inclination to build this skill properly. So they operate on “borrowed conviction” – ideas picked up from a friend, a TV show, a Telegram channel, or the latest YouTube guru.That works only till the price is going up. The moment the stock falls sharply, the borrowed conviction vanishes. Since they never really understood the business, they don’t know whether to hold, buy more, or get out.When our team at Value Research Stock Advisor (VRSA) recommends a stock, we go through the full grind – business quality, numbers, competition, valuations, risks and so on. But even with that research behind us, we never tell investors, “Forget mutual funds, do only stocks.” We see individual stocks as a side for the right investor with the right expectations and a limited allocation – not as the main engine of a family’s finances.

Why mutual funds alone are enough for most people

None of this is an argument against equity. It is an argument against do-it-yourself equity picking for most savers.

If your goal is to build wealth over 10, 20 or 30 years, a sensible mix of equity mutual funds can do the heavy lifting for you – without turning you into a part-time analyst.Over the last 20 years, a broad index like Nifty 50 TRI has turned Rs 10 lakh into about Rs 1.27 crore. A good diversified equity fund, chosen wisely and held with patience, has matched or beaten this. The key words are “chosen wisely” and “held with patience”.The tragedy is that many real-life portfolios don’t enjoy these index-like returns.In VRFA, when we analyse investor portfolios, we repeatedly see three common issues:

End result: while the index makes 13-14 per cent a year, the average investor ends up with something like 9-10 per cent because of buying and selling at the wrong time.So the underperformance is not because they missed some exotic multibagger. It’s because they didn’t build a simple, robust structure and then stick to it.In VRFA, our solution is deliberately “boring”: we focus on building a core mutual fund portfolio that fits your goals, risk profile and time frame, and then prevent unnecessary tinkering. For most Indian households, that alone is enough to reach their long-term targets.

A sensible way to use direct stocks: the “experiment sleeve”

But what if you genuinely enjoy following companies, reading about businesses, and still feel a strong urge to own a few shares directly?Simply telling you “don’t do it” may not work. Suppressed curiosity often shows up later as impulsive decisions. A better approach is to give this urge a limited, well-defined space.Think of your equity allocation as two layers:

This “experiment sleeve” lets you learn, make mistakes on a small scale, and satisfy your curiosity – without putting your serious goals at risk.

Some ground rules:

This is exactly how we think about it at Value Research. VRFA is there to build and maintain your core mutual fund portfolio – the part that should eventually fund your child’s education, your retirement and your major life goals. VRSA is there to support that smaller, satellite portion where you buy individual companies – carefully, with proper research, and within clear limits. One is the main meal; the other is the side dish.

So, should you do direct stocks?

There is no one-size-fits-all answer. But there is a simple checklist you can use:

If the honest answer to most of these is “no”, you are not missing out by skipping direct stocks. In fact, you may be saving yourself from mistakes that have cost many others lakhs of rupees.If your answer is “yes”, then by all means, explore direct stocks – but do it with humility, with clear limits, and with the understanding that for most Indian families, real wealth is created not by catching the next hot stock, but by sticking to a simple, sensible mutual fund plan for a very long time.

(Ashish Menon is a Chartered Accountant and a senior equity analyst in Value Research’s Stock Advisor service.)