Mutual funds and Stocks?

Question

Can someone please describe the difference between investing in stocks and mutual funds. What are the pros and cons of each and which one is more profitable. Thank You

Answer 1

There are several main differences. Buying a mutual fund allows you to spread your risk among many different stocks. Buying stocks concentrates your risk among only the stocks you buy.

Pros and cons:

Mutual funds have to distribute realized captial gains each year so you have to pay taxes each year. That is a con. They also have expenses they charge to the investor, about 1.5% on average. That is a con. They invest in a diversified number of stocks. That is a pro. A good mutual fund returns on average about 10% to 13% annually over a long period of time. That is a pro.

By purchasing stocks, as long as you do not sell them you do not have to pay taxes on the capital gains. That is a pro. You need to own about 10 different stocks to minimize specific risk. That is a con. Some investors can not resist selling their stocks when they receive a 50 to 100% increase in value. That is a con. Some investors hesitate to sell their stocks when the price drops 25%. They think the price will recover. That is a con. Some investors can not resist the hot stocks and buy them when they have reached their peak. That is a con.

A good stock is definitely more profitable than a good mutual fund. But a good mutual fund will give you more consistant annual returns year after year after year.

Answer 2

Stock are like owning a very small part of a company that you believe will do well...

A Mutual fund is a large group of stocks...

Owning stock is very risky and is not recommended until you have a lot of money to buy a bunch of different stocks ...which is called a diversified portfolio

When starting out in investing it is always best to buy a Mutual fund and check how well it has performed over the past 5 years...

Good Luck

Answer 3

Stocks are pieces of ownership in a company. You buy the stock of a company that you think will grow more valuable and so increase your wealth. Some companies pay dividends to stockholders, others don't. Buying stock is the more direct route when compared to mutual funds. It puts your money at greater risk if the company does poorly, but gives better returns if you do good research into the company.

Mutual funds, essentially, are like portfolios of a lot of stocks from a particular industry or other categorization. They're meant to help provide diversity and protect investors from downturns in the market. They're typically managed by a group of ppl who decide where to invest the money put into the fund in order to make a profit. These managers and they're employees all get paid, which cuts into the earnings of the investor, but it provides professional management.

The most profitable option is stocks, mutual funds cut too deeply into your earnings. They're meant to provide diversity, but you can easily get that by buying stock in good companies from various industries if you take the time to do research, which is much easier with the Internet. Advisers may recommend mutual funds, bc they get paid the longer you own them (which cuts into your earnings again) but don't buy them. The quality of management given them doesn't outweigh the cost of management. Do some research and buy stocks in good companies, it will benefit you much more in the long run.

Answer 4

Mutual funds pool money and buy a lot of different stocks. Hence, they are unlikely to take a dive if one company has bad news, and unlikely to rise a lot if one company has good news.

Answer 5

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Answer 6

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Answer 7

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