| One of the most important questions plaguing the | | | | option for investors who can go big.o |
| minds of investors is the type of asset to invest | | | | Diversification: Again, the problem for small |
| in. The most pertinent question is which is more | | | | investors is diversification to cushion themselves |
| beneficial: stocks or mutual funds. Most investors | | | | against the vagaries of the market. Mutual funds |
| are aware of what stocks are and how to trade | | | | allow them the benefits of diversification without |
| in stocks in the stock market. | | | | investing much. However, a big investor can |
| Mutual funds are holdings of stocks managed by | | | | always diversify over a variety of stocks to |
| fund managers on behalf of the investors. As a | | | | achieve the same objective.o Time devoted: |
| simplified concept, when a company and an | | | | Stock trading is a time-consuming effort. The |
| individual buy shares of that company together, it | | | | investor has to study the world market, the |
| is called a mutual fund. Mutual funds can be bought | | | | trends in the market, the profit-making sectors, |
| directly from the fund or from brokers. | | | | company backgrounds, etc., before taking the |
| While some mutual funds, called managed funds, | | | | crucial decision of investing in a particular stock. |
| are managed by investment professionals, others | | | | Even after investment, tracking stock |
| known as non-managed funds are based on an | | | | performance takes up tremendous amount of |
| index, such as the Dow Jones Industrial Average. | | | | time and effort from the investor. Conversely, |
| The profit incurred from non-managed funds | | | | investing in mutual funds is far less time |
| depends on the fluctuation of the price in the | | | | consuming. After selecting the mutual funds with |
| index. | | | | the help of a financial planner, the responsibility of |
| Mutual funds can be of the following types:o | | | | fund management passes on to the fund |
| Money market funds that include investments | | | | manager and financial planner.o Management and |
| made by the US government and the "blue chip | | | | efficiency: Investors need to have access to |
| corporations." They are low-risk, low-gain funds.o | | | | various research materials available in the market |
| Bond funds yield higher returns over money | | | | in order to gain the stock management efficiency |
| market funds and carry higher risks for | | | | and skills. Mutual funds are managed by |
| investors.o Stock funds yield the highest returns | | | | professional fund managers who carry out the |
| but are also affected by the market conditions | | | | research much more efficiently.o Say in |
| quite quickly. | | | | investment and risk of fraud: Investors, no |
| The following points can be considered before | | | | matter how much they invest, do not have any |
| reaching a decision on whether to invest in stocks | | | | say in the investments made by the mutual fund |
| or mutual funds:o Amount of investment: Mutual | | | | managers. Mutual funds are also susceptible to |
| funds are always thought to be a good option for | | | | fraud as the actual value of a mutual fund share |
| small investors who do not have a huge sum of | | | | is not known with the same accuracy as stocks. |
| money to invest and yet want to reap the | | | | To conclude, mutual funds are good investment |
| benefits of investment. It is always a good | | | | options for new and small investors. However, |
| low-risk, low-gain option for them. However, the | | | | even they are not absolutely free from risks. |
| management and carrying fees charged on mutual | | | | Hence, care must be taken while making any kind |
| funds cut into the profits and investment capital | | | | of investment: stocks or mutual funds. |
| for investors. Hence, stocks may be a good | | | | |