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Concentrated stock baskets vs mutual funds -Comparison, how to choose?

Written by - Marisha Bhatt

May 9, 2023 6 minutes

Mutual funds today are one of the most popular investment options for an average investor. However, there has been a constant investment dilemma for investors regarding whether to invest in stocks or in mutual funds. To resolve this dilemma, investors also have the option to invest in a curated stock basket which is a more focused investment option as compared to mutual funds. It resolves the shortcomings of investing in pure stocks and provides a better option than it. So which is the better investment option – concentrated stock basket vs mutual funds? Read on to know more. 

Read More: Top 5 stocks with highest 5y CAGR in their sector

What is meant by concentrated stock baskets?

A concentrated stock basket is a portfolio of stocks that consists of a small number of carefully selected stocks based on a particular investment theme or strategy. It is a high-risk, high-reward investment option that can result in significant gains or losses. It allows investors to focus on specific companies or industries that they believe have strong growth potential. However, it is generally considered suitable for experienced and knowledgeable investors who are comfortable taking on high levels of risk.

What are mutual funds?

Mutual funds are investment vehicles that pool money from a group of investors to invest in a diversified portfolio of stocks, bonds, or other securities. Each investor in the mutual fund owns a share of the portfolio, and the value of their share depends on the performance of the underlying securities. Mutual funds are professionally managed by fund managers who make investment decisions on behalf of the investors in the fund. They provide diversification, and liquidity and can be a simple and accessible way for investors to invest in the stock market. However, it is important to choose a mutual fund that aligns with the investment goals and risk tolerance as well as to be aware of the fees associated with the fund before making an investment decision.

Concentrated stock baskets vs mutual funds – how are they different from each other?

A concentrated stock basket and a mutual fund are two different investment options with their own unique features and benefits. Here are the main differences between the two:


A curated stock basket is a collection of individual stocks selected by an investment manager based on a specific theme or strategy. On the other hand, a mutual fund is a pool of money from multiple investors that is managed by a professional fund manager who invests in a diversified portfolio of stocks, bonds, or other securities.

Investment size

A curated stock basket may require a higher minimum investment compared to a mutual fund, as it typically includes a smaller number of stocks with higher individual share prices. Mutual funds typically have a lower minimum investment requirement, making them accessible to a wider range of investors.


A curated stock basket may be riskier than a mutual fund due to its concentrated holdings. If one or more stocks in the basket perform poorly, the overall return of the basket may be negatively impacted. In contrast, a mutual fund’s risk is spread across multiple securities, which helps to reduce the impact of any individual stock’s performance.


A curated stock basket typically includes a limited number of stocks, which means it may be more concentrated and less diversified compared to a mutual fund. In contrast, a mutual fund holds a larger number of securities, which helps to spread the risk across different sectors and companies.


Curated stock baskets may have higher fees compared to mutual funds, as they are actively managed and require more research and analysis. Mutual funds generally have lower fees as compared to the former due to their management style.

Concentrated stock baskets vs Mutual funds – What should investors opt for?

The choice between a concentrated stock basket or mutual funds depends on their risk tolerance, investment goals, and investment experience. A concentrated stock basket is a high-risk, high-reward investment option that is suitable for experienced and knowledgeable investors who are comfortable taking on high levels of risk. 

In contrast, mutual funds are generally considered a more diversified investment option that can provide a good balance between risk and reward. They can be a simple and accessible way for new investors in India to invest in the stock market. Overall, investors should carefully consider their investment goals and the fees associated with each investment option before making a decision. Additionally, having a diversified portfolio that includes both mutual funds and a concentrated stock basket can be a good way to spread out risk and potentially increase returns.


Concentrated stock baskets provide curated investment solutions to investors based on their individual needs. This makes them an attractive investment option as compared to mutual funds which cannot be customised. Having the potential for higher returns also makes them an excellent investment option in terms of wealth creation. However, they require a deep understanding of the market to understand the market fluctuations and their impact on investments. Mutual funds, on the other hand, are tried and tested investment options with an available track record to evaluate performance on regular basis, thereby ensuring the possibility for readjustment of mutual fund portfolio on a timely basis. 


How are concentrated stock baskets taxed?

Concentrated stock baskets are a collection of carefully curated stocks or equity instruments. Therefore they are taxed in line with the gains from the sale of equity and equity-related instruments.

 What are the factors to consider while opting between concentrated stock baskets and mutual funds?

Some of the factors to be considered while opting between the concentrated stock basket and mutual funds include investment goals, fee structure, risk appetite, and minimum investment amount.

Are concentrated stock baskets made of only stocks?

Concentrated stock baskets include specially selected stocks or ETFs as per the investment strategy. 

What are the risks of investing in concentrated stock baskets?

 A few risks of investing in concentrated stock baskets include lack of diversification, high volatility,  liquidity risk, company risk, etc.

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