how are mutual funds different than stocks?

Answer 1

There are several differences.
1. some mutual fund do not even invest in stocks at all. Some invest in bonds.
2. mutual funds have annual expenses that have to be paid, normally about 1.5% on average. There are no annual expenses with stocks
3. To buy a no load mutual fund costs you nothing. To buy stocks cost you brokerage fees. Same to sell.
4. Buying a mutual fund as opposed to a stock allows instant diversification of ones investments with corrrespondingly much less specific risk than in buying a stock. The stock you buy may turn out to be a very bad investment. That is much less of a risk with a mutual fund.
5. mutual funds unless they are closed end funds which trade like stocks can not be bought and sold at any time during the day. They can be bought and sold only after the market closes and only if you place your order when the market is open. They are in that respect much less liquid.
6. front end load mutual funds have a sales charge that must be paid.
7. most if not all open end mutual funds have an early redemption fee that must be paid if you redeem within a certain period of time normally 30 days to 90 days.
8. If you buy and hold stocks there is no tax expense in doing so. If you buy and hold mutual funds, there inevitably is realized capital gains that will be taxed at year end.

Those are the main differences that I can think of at the moment. I am certain that there are others that I have not thought of.

Answer 2

In short, mutual funds is the investment scheme the pools everyone money to make an investment in stocks. So this is the difference. Indeed, they are many kind of mutual funds. For details you can check the link out.

http://financialindependent.blogspot.com/search/label/Unit%20Trust

Answer 3

Mutual Funds contain MANY stocks.

Answer 4

Over 900 mutual funds closed down in 2006 also over 70 percent of mutual funds lost money last year but of course the fund company still charges for the service of helping you lose your money.The mutual fund companys care about collecting fees from you.Buy stock directly warren buffet did and look what it did for him.The mutual fund companys spend more time fighting over whos bigger and better.Ask yourself this if the funds are diversified then one would think that when one goes up the other would go down but you would not lose money HMMMM.Most fund managers don't know what there doing,and the salesman are only looking to collect a commission off of you.Educate yourself and buy stocks directly,why pay for someone else to help you lose money?

Answer 5

mutual funds are investment pools. they can either focus exclusively on one asset class or comprise a wider range of investment classes. the most common are equity mutual funds and bond mutual funds. in regards to the mutual funds investing in equity, they are not different at all from a direct investment in stocks as they share the same risk-return characteristics as a direct investment. in fact you could replicate any mutual fund's portolio yourself. however, this would be smewhat more troublesome for you when compared to buying into the mutual fund and holding shares of an investment pool that changes in accordance to the manager's views and objectives.
in the end you're trusting the management team with the responsability of pursuing your best interest.

Answer 6

Mutual funds are a group of stocks managed by someone. Stocks are bought and sold in large groups and you are just one of thousands of people who own them. There is safety in numbers - the grouping allows the manager to use the money to vary the sticks invested in so if one goes down you do not lose everything, hopefully more go up than go down.

Answer 7

Mutual funds are comprised of a variety of single stocks so that they are less volatile.

Look at it this way if you buy stock in (fictional company) Acme Rocket Launchers and the company goes under you have lost your investment.

If you invest in (fictional mutual fund) Hoyle lifstyle fund, your money is split between a large number of stocks so that if one of the companies doesn't do well it won't deplete you entire investment.

Hope that explains it for you

Answer 8

Mutual funds are pool of securities and earns high rate of return.The advantage of mutual funds is risk diversification. In case of stocks risk is high.

Answer 9

diversified, large pool of money, do not own stock directly