Friday, September 25, 2009

Mutual Funds VS Stock Investment

A lot of people prefer to invest in mutual funds over stock investment while some claim that stock investment is providing much better return than mutual funds. It cannot be denied that both investment vehicles are providing good investment opportunities for investors but investors should always look for the better ones that could give the required return over the long term.

So, in this post, I am going to share with you the Advantage and Disadvantages of Mutual Funds and Stock Investments.

Mutual funds and stock investments are known to be the popular investment vehicles for investors all over the world. There are people becoming very rich using mutual funds while there are people become very rich through stock investments, to name one - Warren Buffett.

One of my friends is becoming very rich and wealthy through mutual funds investment. You can read The Story of My Friend Becoming Rich using Mutual Funds. So, who say mutual funds cannot make you rich?

Anyway, investing is all about discipline and strategy. No matter it is mutual funds or stocks, you can be very rich, if and only if you are disciplined and have a proper strategy in your investment plan, nothing will go wrong.

So, let us go into the advantages and disadvantages of Mutual Funds and Stocks Investment.

Mutual Funds
Stocks Investment
·         Managed by professionals fund managers and fund managers always get the financial news faster than any people out there because managing funds is their full time job.
·         You have all the control in your hand and you make decision yourself based on your own analysis on the stock you want to buy. Investing is not your full time job.
·         Fund managers are well trained professionals. They have the tools, software, the knowledge and skills to manage funds.
·         You know what you are investing in. You can set your investment style such as dividend style or trading style.
·         Proper portfolio diversification.
·         Diversification based on your own strategy.
·         Professionals will also make wrong decisions.
·         You have to learn stock investment from the basic.
·         The financial goal of fund manager might be different from yours. Most of the time you don not know what they are investing in. You will only know when you get the report.
·         You are not well trained in the field of investment. You might be lacked of knowledge and software to help you analysis your investment.
·         The return is not up to your expectation.
·         Learning and analyzing will take a lot of time and efforts.
·         Only perform well in bull market.
·         Performance is based on your investment strategy.

It should be noted that Mutual Funds is charging very high fees as the management fees. So, make sure you consult your mutual fund agent before making any investment. As for stock investment, the fees are very low, it is around 10 times lower than the fees charged by mutual funds. (The fees differ from bank to bank, so please consult the agent about it.)

From the table above, you can see that both of the investment vehicles have the good and bad. It depends on your investment style. If you believe in professional, then make sure you find the really good professional fund managers for your investment.

If you believe more on your own ability to invest, then you can try to learn the basic and start invest in the stock market. Do not jump directly into stock investment if you are not sure what you are doing.

Time is an important factor for successful investment. So, do not hesitate to invest your money. Let your money work hard for you to earn more money.

Either way, investing in mutual funds is actually investing in stock market because fund managers will help you invest your money in stock market. You can read my "What is Mutual Funds or unit Trust" in the post to come.


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