What is the difference between owning a mutual fund and owning a basic stock portfolio that you...?

Question

... leave to the care of a professional (such as one working for an investment firm/co.) to deal with?

For someone not sound in the advanced elements of investing, these two seem to be virtually the same (controlled by someone else other than that who owns them). Obviously, though, they are not the same... thanks guys

Answer 1

stock portfolio
riskier - because there are fewer stocks
better chance for gain - because there are fewer stocks
professional fees probably much higher
you should probably spend more time monitoring
if you have a strategy, they can implement it for you

mutual fund
more diversified - less risk
There are many mutual funds designed to follow an industry or a country - which gives you options.
lower fees
you have no say in which particular stocks are held.
The management is kind of automatic, you don't have to worry about it.
If you don't like their strategy or their results, you can just sell, probably without fee or negative consequence.

Answer 2

Having a professional work a portfolio will be more expensive that owning mutual funds. The professionals who would be handling your account will charge you fees. Sometimes, they charge fees to buy or sell stock in your portfolio. They do not charge fees based on how much you make. Therefore, they have motivation to churn your portfolio by buying and selling often. This is not in your best interest.

There are some mutual funds out there that charge a lot as well. You need to research your funds before you buy into them. You need to see how they charge their fees and what their fees are. There are some mutual funds that you should just plain leave alone.

Another difference is that many mutual funds have way more diversity than a person could manage in your personal portfolio. The person managing your portfolio is also doing the same on a few others. The person does not have time to research and keep track of thousands of different stocks to see if they are worthy of your money. They usually limit themselves to a few favorites and go from that. Mutual fund managers (most of them) try to make money and keep diversified. In fact, there are laws that prevent a mutual fund from overinvesting in any particular stock.

Answer 3

A Mutual Fund is a Hugo Boss bought at Wal-Mart.
A Stock Portfolio managed by a Portfolio Manager is a fine suit made by a Italian Tailor just for you.

Answer 4

Equity Shares are the share listed in the stock exchange and u can buy or sell it from exchange or stock traders . But stock markets are very much unpredictable . So , if u donot have knowledge of how to work u can loose ur money. Mutual Funds r the schemes under which the money is invested in the Equity Shares but under that u won't be worried about which share to buy or invest but that is taken care by a group of expert people

Answer 5

Well obviouslly, if you do not have much knowledge of the market and do not have an interest in learning about the market get into a mutual fund. Playing the game of investing is a great game to play and sometimes not so great like it is now with these oil prices. I would say get in the game for yourself. Good Luck!

Answer 6

after reading the previous answers, I thought I had to add my 2 cents. The whole thing boils down to how good the management is. If you are a small investor, less than a million you will not receive most probably good professional management for which you will however be paying. With a mutual fund you will be paying for management of course at about 0.7 per cent for the less expensive funds. There is a track record published that you can reference. There is none for your personal professional manager.

That is about the bottom line, as I perceive it.

Answer 7

The differences, as you suggest, will depend upon the who's managing each. Otherwise, a stock portfolio is typically less diversified, with more risk and more potential reward/loss. A mutual fund is typically more diversified and less volatile.

Answer 8

Mutual funds are way to expensive. Most people that want diversification have gone to ETF's. They are pooled funds also by industry or whatever. Commissions are less than MF's. Actually, diversification is just another word for ignorance. Try educating yourself about the market and work your own portfolio. You should at least know how to 'insure' your stocks. After all, we insure our house and our car, etc. Many portfolio's have as much or more value than those items.

Answer 9

You pay a fee to to hold the mutual fund, an expense ratio. They are experts and spend all day on your fund. So most figure that's better/worth the fee.

Answer 10

Since I am a stockbroker I can answer this question, but you said "thanks guys" and I'm not a guy. I'm assuming you only want men to answer for some reason?