Mutual Funds vs. Stock Ownership: Which is Best for Your Investing Style?
When you purchase a share of stock, you purchase a piece of a company. When you purchase a share of a mutual fund, you are purchasing a collection of stocks, bonds, and/or other securities with a group of investors. These shares are managed by an investment company.
So, which is better for your investing style ? a stock share or a mutual fund share? The answer is, ?it depends.?
Managing yourself or leaving it to the pros.
If you have the time to research and manage your investment every day, you may find that stocks work best for you. However, if you would rather that the day-to-day management of your investment rest with trained professionals, a mutual fund that fits your tolerance for risk may be more appropriate.
The ability to diversify.
You?ve heard it before ? ?don't put all your eggs in one basket.? By owning individual stocks, you can certainly diversify your portfolio. But, again, this will take research and daily management. With a mutual fund, the portfolio manager may have included stocks in the fund that would cushion the blow should one drop. A mutual fund can include a few stocks and bonds to several hundred. Remember, there is relative safety in numbers.
The convenience factor.
When you own shares in a mutual fund, the record keeping of transaction s is handled for you and, periodically, you will receive a statement of your holdings. Stock transactions can be a more complicated experience. For example, you will need to keep track of your buys and your sells ? this can be time consuming and complicated ? especially at tax time.
Basically, those who purchase mutual fund shares do so because they want the diversification that mutual funds can often provide and the convenience of leaving the investing ? and reporting ? up to the pros. For those that like the excitement of individual stock ownership and who don't mind the ?paper trail,? individual stock ownership is a viable option.
Working with your financial planner, you can not only determine which option is best for you, but also the type of investor you are, including your tolerance for risk and how the right investment plan can help you to reach your financial goals.
Only if You Want to
Get the Best Returns
On Your Retirement/Investment Assets
- Past Results
- Fee Schedules
- Investment Style
You may also be interested in...
Corporate ethics. Clean industry. Fair wages. As oxymoronic as these phrases may sound in traditional business, many investors are now basing their investment decisions on these principles. Investors are beginning to align their values with their investments. Many people believe that they... more
Background Energy Royalty trusts are neither stocks nor bonds, although they share some of their characteristics. Investment trusts are created to hold interests in operating assets, which produce income and cash flows that are passed through to investors. A "trust" is a legal instrument, which... more
Hedge Funds have been getting a lot of press lately. The mutual fund scandals have forced the SEC to come up with new ways to oversee this growing industry. Regardless of whether tighter supervision is good or bad, in most cases, hedge funds are still reserved for the ultra wealthy. What many... more
Investments in bonds should be tailored to your investment objectives, risk tolerance, and other personal circumstances. Answering some fundamental questions will help you determine the role bonds should have in your portfolio: What are your overall investment objectives? Investors committed... more
No investment, including municipal bonds, is appropriate for every investor. Before purchasing, consider their advantages and disadvantages to see if they are appropriate for your portfolio. Some of the advantages include: Municipal bond interest income is generally exempt from federal, and... more