In what way a small investor should invest in market?

Should i invest in mutual funds or directly buy shares?

It really depends on your buget. How much do you want to invest? Passive or Agressive?
Mutual funds are for Passive investments and buying shares can make you more money but can also break you.

Mutual funds
(Pros) - More likely to climb in your investments, used in your 401k or retirement fund, some mutual funds are great way to invest for retirement.
(Cons) - Your money fluncuate up-down, you can end up with a 201k instead if the economy dips.

Purchase Stocks
(Pros) - You can triple your investment, you can use the buy and hold method, gives you a wide choice to invest.
(cons) - you can lose all your money, I've seen people go up to 50 million and fall down to negetive.

Have you heard of Active Money Management? It's almost the same as Mutual Fund, but more active. The difference is that with active management they have investors looking at your money 24/7 and they'll cash out before the investment falls. So it gives you a better chance of a more aggresive long term investment. it's anywhere from 5 to 12 percent in gross earning. I think most minimum to invest your money is at least 100,000.00 but you can find some firm that will do it for 10,000.00.

The con's for active money management is that the investors charge you i think 2% every quarter. But after all you still gain like 2 to 8 percent guranteed right?

If you are starting out mutual funds are better in my opinion, because you are buying into some diversification automatically. Take your time researching some healthy funds, because you are going to look at the long term rather than the short term. Things you want to look for are:
No-load funds, managers that have been there for more than 5 years, expense ratios of less than 1% (this is becoming harder and harder). And a solid rate of return for the last 5 years. And finally, (prolly should have put this first) make sure you have enough for the minimum investment, I recently found a killer fund that had unreal numbers I got very excited until I saw the minimum buy-in was $500,000, oh well. Stay strist with whatever discipline that you use. Good luck, the first step is to go to yahoo finance look up a few funds and get familiar with all the numbers on there, especially the ones I mentioned.

buy stocks, and a good source is http://www.goldenbullstocks.com

Mutual Fund, Because any investor can buy share & sequreties of diffirent company by investing a nominal amount and mutual fund makes a portfolio of investing. Buy share directly is depend on u if u have enugh knowledge and resoureses to understand market than u will be a better investor because mutual fund give u risk reduction their fund maneger market timing.