http://www.debts.org/index.php en info@debts.org Copyright 2008 2008-12-01T15:28:00+00:00 http://www.debts.org/11/index/mutual_fund_vs_individual_stocks/ http://www.debts.org/11/index/mutual_fund_vs_individual_stocks/#When:09:46:00Z Getting access to some stocks can be difficult on an individual basis. For this reason mutual funds give people access to securities that would otherwise be unobtainable to the average investor. This is equally true of foreign securities that can only be bought via a foreign mutual fund. Although buying securities is probably more fun if you act independently, the fact remains that investing is serious business. Debts has compiled a list of reasons why investing in mutual funds is more favorable than acting on an individual basis.SafetyIf you are deciding whether to buy stocks individually or as part of a mutual fund, one of the key factors to consider is safety. More.... If prone to making emotional decisions, you may be better putting your money and your decision-making in the hands of a professional fund manager. A good fund manager will be experienced enough to rely on instincts rather than flashing dollar signs. Gambling is difficult to do without becoming emotionally involved and it is when our emotions run high we run the risk of making mistakes. Investing is much like gambling, in that the outcome is never certain, therefore you may life to play safe and let the professional trader make the important calls.Diversification Diversification is the secret of every successful investor. If an investor has acquired wealth by not having a diverse range of stocks or bonds, it is only because they have been able to purchase large amounts of one security.The reason for diversifying is straightforward – it greatly reduces risk without sacrificing on returns.Large scale investmentsMutual fund companies can use the money from a pool of investors to purchase stocks in bulk. Large sums of money means the mutual fund company can often trade commission-free and utilize their contacts at brokerage firms for the benefit of everyone – especially the investors.Portfolio managementUnless you have lots of time and a good head for complicated bookkeeping, mutual funds are always the better option. Managing your portfolio is a full time job and nothing other than total commitment will ensure success. A fund manager has both the time and experience of keeping track of stock markets and investors’ assets. LiquidityIf it is high liquidity you are after then mutual funds are your answer. We all find ourselves in situations when we need money fast. Gaining access to money invested in a mutual fund is easy. If your fund manager receives your request in time, money can be in your bank account when markets close that same day. Alternatively, you can have a check mailed to you by post.Some mutual funds have a check writing facility, which can be used in the same way as a regular checking account. NB: Gaining access to money tied up in stocks can be difficult depending on the type of investment. Certificate of Deposits (CD’s) offer no liquidity whilst bonds can also be subject to tight restrictions.Cost effectiveness Individual investors often have to pay transaction fees that can be in the region of $18. For the small investor who is putting away $100 every month, the total investment is already down 18%. It is therefore clear to see that this method of investment makes it extremely difficult for the small investor to make any real money.Mutual funds, however, give new investors the chance to invest any amounts of money, regularly, without the heartbreak of trading costs. A mutual fund, has mutual respect (word play intended) for all investors, no matter how much or how often they invest.Lower riskAs we have already seen, mutual funds offer investors a way to invest without the risk associated with stocks. Diversification is one reason and the services of a professional fund manage is another. However, certain mutual funds can be riskier than individual stocks so it does pay to do some homework.One of the major risks associated with individual stocks is corporate bankrupty. If a company you have purchased stocks in goes bust, you lose your entire investment overnight. However, because putting your money in a mutual funds is a lot like spread betting, the chances of corporate bankruptcy wiping out your investment is extremely remote. Especially when you consider mutual funds can carry a portfolio of 25-5000 companies. Mutual Fund vs Individual Stocks 2008-07-16T09:46:00+00:00