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Which is better investment stocks or mutual funds?
If you are new to investments and do not have much idea about risks and returns, mutual funds can prove to be a better option than direct investments in the stock market. Mutual funds offer a wide range of options in terms of asset classes to their investors. For example, you can invest in equities, debt, gold, etc.
Why mutual funds are a bad investment?
However, mutual funds are considered a bad investment when investors consider certain negative factors to be important, such as high expense ratios charged by the fund, various hidden front-end, and back-end load charges, lack of control over investment decisions, and diluted returns.
Is it better to invest in mutual funds or stocks?
For those investors who are looking for extremely high returns, investment in stocks seems to be a more attractive option compared to mutual fund investment. Certainly, there is a good chance of getting high returns in investment in stocks, but the risk quotient is also very high.
What is a mutual fund and how does it work?
A mutual fund is a type of investment fund operated by a money manager who invests your money for you, and attempts to get good returns. Mutual funds are typically made up of a combination of stocks and bonds, however, they carry less risk because your money is diversified across many stocks and bonds.
How do mutual funds reduce the risk of investing?
By pooling a lot of stocks in a stock fund or bonds in a bond fund, mutual funds reduce the risk of investing. That reduces risk because, if one company in the fund has a poor manager, a losing strategy, or even just bad luck, its loss is balanced by other businesses that perform well.
What are the benefits of investing in a bond fund?
Bonds are a relatively safer investment than stocks, so mixing them into your portfolio helps reduce risk. Even when a mutual fund holds 100\% stocks, those stocks aren’t all in one company.