If you have some money left over with you after all the payments of bills and with
no more extra expenses at hand, or maybe is you are interested in some fiscally responsible and prudent gamble with some money which incorporates some investment chances for you, you may find yourself in dilemma as to whether investment in mutual funds or stocks would offer you better returns.
In order to make a sound decision, it is very necessary to first know as to what mutual funds and stocks are;
Stocks: The stocks are actually small individual bits of big companies which are available to people for purchase in the open trading at the stock exchange. These stocks are usually sold in bundles and purchase of a stock of a company also entails some minimum number of shares which need to be purchased.
There is a vested interest of stockholders in the well being of a company as the prices of the stocks they hold are directly linked to the health of the company and its performance.
Stocks get divided as per the business they usually represent, which is called the sector.
Mutual Funds: Mutual funds are a collective form of investments which pool funds from an investor lot and invest that amount in bonds, stocks and several other investments. Usually these funds are managed by certified persons who are capable of taking sound decisions. Mutual funds in a sense incorporate different kinds of stocks.
Now the question of making investments in mutual funds or stocks would depend on the personal experience and funds available with a person.
It is a fact, that by the stocks when they become available in market become highly overpriced and purchasing them involves huge risk as your entire savings are dependent on the performance of just one firm. Even experienced and wealthy people usually diversify their portfolio by making investment in different kinds of stocks and this is not affordable for a normal person with average means.
So the better investment for a beginner is to buy the mutual funds. Mutual fund will actually aggregate different stocks and pool their costs which would lessen the overall risk of you losing your money and at the same time raising your chances of the good returns.
Actually mutual funds many not have the excitement of instant and huge gains which stocks provide, but they are excellent investment for a financial opportunity on the long term basis.