What is the Actual Difference Between Stocks and Stock Mutual Funds?

Searching for the difference between Stocks and stock mutual funds? Stock investment is an investment in a share of a single company whereas mutual funds investment is an investment in a single fund that consists of many investments i.e, holding stocks of several companies.

Mutual funds are always the preferred choice of investment because they are more stable in comparison to stocks. For a more detailed difference among the best source of investment between Stocks and Mutual Funds, refer to the infographic below.

All perks one can avail through investing in either one is mentioned in the image. If you want to know more about the best ways to invest to grow your wealth over time refer to this link – Ways to grow your wealth.

Basic Types of Investment

Stock investing is not that complicated as it seems.  Stock market investing for most people means choosing among Stocks and Stock Mutual funds (i.e., two basic types of investment).

➤ Exchange-traded Funds (ETF’s)

➤ Individual Stocks

Let’s understand more about the features of these basic types of investment in detail.

1. Exchange-traded Funds (ETF’s) – ETF’s or also known as stock mutual funds give you the power to purchase a small portion of multiple stocks in a single transaction. ETFs are a type of Mutual funds only that tracks an index. All funds replicate an index by buying shares of the company in it. So when you invest your money in ETF, it makes you own a portion of the shares of those companies listed in the index too. Stock mutual funds sometimes also known as equity mutual funds.

2. Individual Stocks – If you want to deal with individual stocks then you can buy shares of a specific company you wish to hold shares of only if that company is listed. Investing in individual shares is a way of dipping toes into stock exchanging waters. Building a diversified portfolio consisting of no of stocks is possible only with a significant amount of investment.

The upside of equity mutual funds is in its inherent diversification. It also helps in lessening the risk factors associated with it.

So, for those looking for investment for retirement purposes – investing in mutual funds is the optimal choice.

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