Should you invest in mutual funds or individual stocks?
I personally feel stocks are the best to invest in. Over a long haul, stocks go up most of the time, your investment produces a larger return than the rate of in-
flation and it is a way to own a piece of companies in America. I am not saying the stocks are always on a steady rise. What people need to keep in mind is the history of the stock market over a period of time. Look at the trend of the market for many years back and you will see overall stocks go up and down, however, the average shows that stocks made money for many people despite the downward trend.
A person needs to choose an investment that is suited for their particular needs and goals. Naturally, we would all want to see low risk and high return, but some-times that is hard to find. Usually the higher the risk, the higher the return. I feel this is where stocks over ride mutual funds.
With stocks, a person must be willing to ride the market. If there is a market downturn, then it is an opportunity to buy companies at a discounted price.
There is research involved when picking a stock. The major factors in investing I feel are to invest regularly, reinvest all earnings, invest in quality growth companies, an diversify your portfolio. I feel by doing this a person can make their own decisions and have more control than having someone else make the decisions for them.
There are many factors that affect the total return of a mutual fund. If an inexperienced investor invest in mutual funds, they need to avoid tax traps, assess the impact of management, and sometimes there are fees involved that a person doesn’t know about until they are ready to withdraw their money.
There are some new investments with mutual funds such as exchange traded funds, and closed end funds are more popular now. Some mutual funds are lower risk, but as stated above the lower the risk, the lower the return. One explanation is some mutual funds invest in large cap. companies and the large companies have less room for growth than with a small cap. or mid cap. company. Whatever the case is, research is needed before you hand your money over to someone you don’t know anything about to take care of it for you.
Again, my feeling investing in stocks by far override investing in mutual funds.