Stocks vs Mutual Funds
“Which is a better investment- individual stocks or mutual funds?”- this is a common question asked to financial advisors every day. First, let’s start off by explaining the difference between the two. Individual stocks are essentially buying a “piece” of an individual company whereas mutual funds are shares of many different companies and can also include bonds and securities as well. Essentially, buying a mutual fund is like buying a lot of little shares in each stock in the fund (a portfolio of stocks).
Typically speaking, mutual funds are considered “less risky” than buying individual stocks because they are more diversified across industries and companies. Assuming one or two stocks in the mutual funds fail, your mutual fund as a whole can still remain profitable by the other stock investments that may be performing very well. Conversely, stock investing has more risk, since you are relying on the performance of an individual company.
So, which one is better for investing? That answer relies on the individual who is investing and the risk level that they are comfortable with.
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