Investing in equities is one of the best ways to build long-term wealth. However, how you gain exposure to equities can make a huge difference in your overall success as an investor. Many individual investors believe they can manage their own stock portfolios, but the reality is that direct stock investing requires deep expertise, time, and discipline—things that most non-professionals simply do not have.
As investment advisors, we strongly recommend that investors seeking equity exposure do so through professionally managed investment funds rather than investing in individual stocks. The risks of direct stock investing for non-professionals are significant, and the potential for costly mistakes is high. Below, we outline seven key reasons why we firmly believe that investing in equity through funds is the smarter choice for most investors.
1) Inability to Truly Evaluate the Value of a Specific Company
Professional fund managers spend years developing expertise in financial analysis, valuation methodologies, and company research. The reality is that most end investors lack the technical knowledge and experience needed to accurately assess the fair value of a company.
Analyzing a stock isn’t just about looking at revenues and profits—it requires deep understanding of financial statements, business cycles, competitive positioning, corporate governance, technical indicators, macroeconomic factors, and much more. Without the right training, individual investors risk making decisions based on surface-level information, which can lead to poor stock selection and suboptimal outcomes.
2) Individual Stock vs Portfolio Approach
One of the biggest mistakes individual investors make is focusing on individual stocks rather than constructing a well-balanced portfolio. Investing isn’t just about picking good stocks—it’s about managing risk.
Professional fund managers take a structured portfolio approach, ensuring diversification across sectors, market caps, geographies, and asset types. They use risk-adjusted strategies to reduce exposure to volatility and avoid concentration risks. In contrast, individual investors often unknowingly build highly unbalanced portfolios—overweight in a few stocks, sectors, or themes—leading to far higher risk without commensurate returns. A well-structured portfolio designed by professionals will almost always outperform a random collection of stocks chosen by a retail investor.
3) Poor Access to Information & Insights
Successful stock investing isn’t just about what you know—it’s also about how timely, reliable, and comprehensive your information is. Professional fund managers have access to a wide range of high-quality institutional research, advanced financial models, industry reports, company management discussions, and even direct engagement with corporate executives.
On the other hand, most individual investors rely on public blogs, YouTube channels, media interviews, and social media tips. The problem? By the time market-moving information becomes public, it is often already priced into the stock. Without access to sophisticated research and analytical tools, end investors are often left making decisions based on incomplete or outdated data—leading to subpar investment choices.
4) Not Their Core Profession
Successful investing requires constant monitoring of domestic and global markets, corporate earnings, policy changes, economic data, and sectoral trends. Fund managers dedicate their entire careers to tracking these developments and are ready to act instantly when opportunities or risks emerge.
In contrast, individual investors typically have their own professions and other commitments. They often react late to major news events, missing crucial opportunities or failing to manage risk effectively. Markets move fast, and by the time an end investor decides to act, the impact is often already reflected in stock prices.
Simply put—if investing is not your full-time profession, it’s difficult to compete with those for whom it is.
5) Behavioral Biases Lead to Poor Decisions
One of the most overlooked aspects of investing is human psychology. Individual investors often make emotionally driven decisions—buying when markets are euphoric and selling when there is panic.
This phenomenon, known as behavioral bias, is one of the biggest reasons why individual investors underperform. Some common biases include:
- Overconfidence Bias: Believing they can “beat the market” despite lacking expertise.
- Loss Aversion: Holding onto losing stocks for too long, refusing to exit bad investments.
- Herd Mentality: Following market fads and buying overhyped stocks at inflated prices.
- Recency Bias: Assuming that recent trends will continue indefinitely, leading to short-term speculation rather than long-term investing.
Professional fund managers operate with structured investment processes, removing emotional biases from decision-making and sticking to disciplined investment strategies. This leads to significantly better long-term outcomes.
6) Cost of Active Fund Management is Fairly Low
Many investors hesitate to invest in funds because they worry about fund management fees. However, when considering the cost of mistakes made in direct stock investing, the cost of professional fund management is actually quite low.
Fund managers pool capital from thousands of investors, spreading the costs of experienced professionals, research teams, and sophisticated investment tools across a large base. This makes active fund management accessible at a fraction of the cost an individual investor would incur if they tried to access the same level of expertise and research on their own.
In contrast, poor stock choices, lack of risk management, and untimely exits can cost an individual investor far more than the fees charged by a fund.
7) In Most Other Areas of Life, We Hire Professionals—Why Not for Investing?
Think about this—when your car breaks down, you take it to a mechanic. When you’re unwell, you go to a doctor. When you need a haircut, you visit a barber. Could you do some of these things yourself? Perhaps. But would the result be the same? Absolutely not.
Investing is no different. Managing an equity portfolio requires skill, experience, and discipline—qualities that professional fund managers spend decades refining. Just as you trust professionals in other aspects of life, entrusting your investments to experts is simply the smarter choice.
Conclusion: The Smarter Way to Invest in Equities
Equity investing is a powerful wealth-building tool, but how you invest matters just as much as what you invest in. The risks of direct stock investing for non-professionals are significant, and the likelihood of underperformance is high.
With professional fund managers, you get:
✅ Expert stock selection
✅ Portfolio diversification
✅ Access to institutional research
✅ Disciplined investment processes
✅ Lower risk and better risk-adjusted returns
If you’re serious about building long-term wealth through equities, the choice is clear—investing through professionally managed funds is undoubtedly the better option.