Buying shares yourself, or through a fund

If you want to own shares in listed companies, there are two routes. You can buy the shares yourself, or you can hold a mutual fund that pools your money with others and buys shares on everyone’s behalf. This article describes what each involves and how they differ — it does not say which you should pick, because that depends entirely on you.

Buying shares yourself

Buying shares yourself means opening a demat and trading account and choosing each company you invest in. You decide what to buy, how much, and when to sell; you do the research, and you monitor the holdings. The appeal is complete control and no ongoing management cost on the holdings themselves. The demands are the flip side of that control: the choices, the time, and the discipline are all yours.

Owning shares through a fund

Holding an equity fund means someone else — a fund manager, or, in a passive fund, a set of index rules — decides which shares the pooled money buys. You own units of the pool rather than the shares themselves, and your money is spread across everything the fund holds. That management and pooling is what you are paying for through the expense ratio, a small annual cost deducted from the fund.

The core difference: who chooses

The heart of it is delegation. Buying shares yourself, every decision is yours. Through a fund, you delegate the security-by-security choices and keep only the higher-level ones — which kind of fund, how much, for how long. Neither is inherently right; one suits someone who wants to make those choices, the other someone who would rather not.

How the costs differ in kind

The costs are different in type, not just amount. Buying shares yourself means transaction costs each time you trade — brokerage and statutory charges — plus the value of your own time spent researching and monitoring. A fund carries an ongoing expense ratio while you hold it, whether or not anything is traded, and no per-trade cost to you. One front-loads cost onto activity; the other spreads a running cost across time. Which works out cheaper depends on how you would actually behave, so it is not a figure this article can settle for you.

How the risk differs in kind

Both routes carry full market risk — shares can fall either way. What differs is concentration. A handful of shares you picked yourself rises and falls on those few companies, so the range of outcomes is wide unless you deliberately spread across many, which takes more capital and attention. A fund holds many companies at once, so a single company matters less to the whole — the spread of outcomes is different in shape. This is a difference in the kind of risk, not a claim that one is safe.

This is a description, not a verdict

Neither route is better in general; they are different trade-offs between control, effort, cost and concentration, and the right one depends on how much you want to do yourself and what you are comfortable managing. H2 Investment is a distributor, not an adviser: this article sets out how the two approaches work so you can weigh them, and does not tell you which to choose.