Stocks vs Mutual Funds

Stocks vs Mutual funds, that is the question. Most new investors find themselves trying to figure out if they should invest their hard earned money into stocks or mutual funds. The answer may depend on you and how involved you want or can be in your investments.

Personally I believe that anyone who is willing to take the time to research and continuously learn from the market can eventually get to the point where they are doing better than 99% of mutual funds out there by investing into individual stocks themselves.

In fact, there are a lot of advantages that come with buying stocks yourself.

• Less Charges

When you buy stocks yourself you only get charged broker fees. You do not have to pay any annual fees or other expenses that mutual funds want to charge you.

Mutual funds may double or triple inflation, but in all honestly the 6-9% average annual return that most of them offer isn’t really anything special. Someone who is active in the market should be able to do much better.

• Can Move in and Out Faster

Mutual funds that buy hundreds of thousands of shares of stock cannot simply sell at a moment’s notice. They need to slowly get in and get out so that they don’t cause a huge move in the price of the stock themselves.

Smaller investors don’t have this problem because you may only be buying a few hundred or at most a few thousand shares.

• Pick For Yourself

There is something great about being able to make decisions for yourself, even if sometime they aren’t the best ones.

Mutual Funds

Most people when it comes to stocks vs mutual funds have a higher potential with stocks. But there are a few advantages of mutual funds as well.

• Less Money Needed

If you only have $300 to invest mutual funds might be your only choice. You can put that money into a fund and get into a diversified group of stocks without any problems. Not true if you are just buying stocks.

• Widely Diversified

Mutual funds are extremely diversified. Therefore most of them can be considered a pretty safe place to put your money over the long term.

• Managed by Professionals

However you want to look at this, they are managed by people who are said to be professionals. You can take comfort in having your money invested by people who do it for a living.

Mutual Funds vs Common Stock Final Words

When deciding to invest into stocks or mutual funds, consider your willingness to be involved. How often can you spend learning to invest your money? How willing are you to be involved? How prepared are you to accept the good and the bad that come with making your own decision? And how likely is it that you are going to take any bad mistakes you make as a learning experience rather than an indication that you are a failure?

The more you want to be involved in your investment the more stocks seem like a better alternative. The more you want to just hand it over to a professional and let them worry about it the more mutual funds seem like a better alternative.

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