Stocks vs. Mutual Funds

Stocks have several pros and cons associated with them. Stocks are a great option if you know what companies you want to invest in. They are also a great option if you are interested in day trading. While stocks offer you flexibility and control over the diversity of your investment portfolio they require a lot of work to keep your portfolio properly diversified. A lot of financial experts recommend that your investment portfolio contain investments in at least 20 different companies and in at least 10 different industries. Making this many stock selections can be difficult to do.

Mutual funds are another investment option that you have. A mutual fund is basically an investment set that is controlled by a financial management company. This management company selects the stocks, bonds and other investments that are held by the mutual fund. Mutual Funds are a great way to easily diversify your investment portfolio. The management company does all of the leg work for you. While mutual funds are a great investment option they do have a few drawbacks. The first drawback is that they charge management fees and carrying fees. These fees cut into your profits and investment capital. The second drawback is that the performance of the mutual funds depends partially on the management company’s ability to select good investments and the company’s ability to manage the fund’s investment portfolio. Another drawback to mutual funds is that you don’t have any say in which investment products the mutual fund invests in. Because of this the fund may invest in a company that you would prefer not to invest in, or they may select an investment product that you think is a bad investment. Finally, mutual funds are susceptible to fraud. In recent years there has been several high profile fraud cases filed against mutual fund management companies.

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