Mutual funds v/s Stocks

Mutual funds v/s Stocks

Mutual Fund is an investment programme funded by shareholders that trades in diversified holdings and is professionally managed. A stock is a type of security that signifies ownership in a corporation and represents a claim on part of the corporation’s assets and earnings. Benefit of investing in Mutual Fund is that you get the benefit of a fund manager’s expertise.

Individual investors hold around 20% of the total equity market value, while mutual funds account for about 3%.In terms of volatility, investing in stocks can lead to higher volatility compared to mutual funds. If you want superb returns in short time and you believe you can research well, you can go for stock investing directly but then risk is also more.

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From the above chart one can easily understand the difference between Mutual Funds and Stock Market. Stocks offer ownership stake to the investor in a company. On the other hand, mutual funds offer fractional ownership of baskets of assets. One can enjoy voting rights by investing in stock market which is not the case if you invest in mutual funds. The per share price multiplied by the number of shares is equal to the value of stock held by the investor. On the contrary, the value of the mutual fund can be measured by calculating NAV, which is the total value of asset net of expenses. Mutual Funds are comparatively less risky than stocks, due to the presence of diversification.

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