Investment in mutual funds vs investment in shares - which gives more returns when the risk is minimal?

Answer 1

This question is open to serious debate. There are many studies that suggest that the average run of the mill mutual fund will underperform the stock market in general. In fact about 70% do.

If a person can invest in a diversified portfolio of shares, about 20 that are investment grade (not overally speculative), his expected return will be better than that of most mutual funds and his risk will be less.

The main problem is that most investors do not have the capital necessary to create a diversified portfolio nor the expertise. In that scenario, the mutual fund becomes a less risky investment vehicle. Actually, diversification should also be a strategy of investing in mutual funds. It is much less risky and much more rewarding to invest in several mutual funds with different investment strategies.

Answer 2

Stock investments if for people who can sort through stock details and invest in the 'right ones'. It is a Do It Yourself approach as we call it in the US. Mutual fund investing is investing with a manager or group of managers who is supposed to know what they are doing and will buy a bunch of stocks. The returns will be averaged across many stocks and therefore 'generally' lower. Now if you are a HOT SHOT and can really do well picking stock ALL THE TIME, then you will always do better than Mutual Funds.

Introduce the Index Funds into the mix and the question becomes a bit more complicated.

In the US, individual investors (as a group) have done 3% to 4% return by investing in stocks. Mutual funds have done much better, and averages 10% per year. Index Funds like the S&P have done 11.4% per year. So there you have it. This is a long term record, averaged over many sources, and annualized over many many years. My numbers might be off a bit, but the relativeness is CORRECT.

Make your own decision.....Of course, if you are in India, the story changes since most stocks have gone up, but then Mutual Funds are doing really well. Reliance Fund - Growth has done 1081% over 10 year (I am not off on my decimal point!). It has done 585% over 5 years (yes). And, these are numbers that I pulled middle of last year when the BSE market was down.

Why not put the money in a fund, and enjoy the time off with family or get a 2nd job instead of doing stock investments.

Currently, I do stock, M.Funds and Indexes. I need to listen to my advice and stop wasting my time with stocks since it takes up 20 hours a week of my personal time, and I do not even do this full time!!!!

KKP_Investor

Answer 3

Investing in individual stock will usually give you more returns...but you mention " minimal risk" and that is what mutual funds do a little better. If you pick one or two companies to invest in, they can both have bad days ( or weeks, or months) but the mutual fund is invested in probably 50 or more,,,,some having bad days but being balanced by those having "good days, weeks, etc.
If you get a quote for a fund on yahoo, go to the link that says "holdings" and you can see what I'm saying; if you go to the bottom of the "holdings" you can get quotes for them.....most days there will be some up and some down.....reducing risk.
Also in the holdings chart you can see the gains that the individual stocks have made( I think its over the last year)...if you were lucky enough to pick the best one, you would be way ahead of the fund...more return.
Generally, when you look for " minimal risk" it would be in large companies that deal in necessities such as Johnson & Johnson or Proctor & Gamble, General Mills....but their returns are not great, just steady.
Hope I didn't wander too far off the question !!

Answer 4

mutual fund is a corpus fund wherein several investors put in their money, while shares invest in a particular company. so it is obvious that the risk is minimal in the former and maximum in the latter.
if you need more returns with minimum risk, you may invest in Equity-oriented mutual funds, which combines the advantages of both mutual funds and equity shares.

Answer 5

Mutual Funds - Min Risk as money is invested in various companies. Return is Less, as it is dependent on cumulative sum of returns from all companies

Shares - Max Risk as money is invested in one single company. return is More, if company's revenue rises.

Answer 6

Yeah like all human beings has been announcing, "previous overall performance isn't any indication of destiny consequences". understand that mutual money positioned money into distinctive securities. those securities frequently comprise shares or bonds. With shares you are the owner of a enterprise. With bonds, you're loaning money to the two a enterprise or government. Bonds tend to be seen safer than shares because of the fact they pay a mounted interest value written on a bond and "mature" after a definite form of years at which factor the finished theory fee is paid back. on the different hand shares would or will possibly no longer pay dividends, and inventory fees variety wildly based on the industry's theory of the destiny boost and value of the enterprise. some agencies are reliable and much less complicated to foretell (like utilities or shopper staples). Their inventory fees tend to variety much less because of the fact the agencies boost. on the different hand some agencies have extra uncertain futures and to that end wilder inventory fees. usually circumstances the very comparable mutual money which do great over a definite form of years prove to do extraordinarily over the subsequent couple of years. as an occasion bond money have beat out inventory money via extensive margins over the final 10 years because of the fact the financial equipment has been so undesirable that human beings have been rushing to the protection and stability of bonds and bond mutual money. in spite of the undeniable fact that if the financial equipment turns around inventory money will probable blow away bond money. particularly if rates of interest start to upward thrust lower back (which might push bond fees down). I strongly propose speaking with a financial consultant in case you have any questions approximately mutual money or how they are in a position that might actually assist you attain your financial aims.

Answer 7

investment in mutual fund- the profit and loss is shared by a group
In share profit and loss is born by the investors
in insurance the loss is compensated by way of switiching in which it gets transfered to bond and then to share as per the value

Answer 8

in mutual funds risk is reduced

Answer 9

its mutual funds because it is handeled by experts