Mutual Funds or Stocks

Mutual Funds or Stocks for Beginners

5 min read

Are mutual funds or stocks better? It all depends on your trading style. What do you want to accomplish in your investments? There are many different ways to invest in the market. You can day trade, swing trade, or invest. You can do just one or all three. There are many possibilities in trading. As a new trader, deciding how to make money is up to you.

How much reward do you want? How much risk are you willing to take? The higher the reward, the higher the risk. Are you willing to research companies?

Stock training is necessary. It takes study, practice, and discipline. As we learn about funds and stocks, you can decide which is the best fit for you.

The stock market is a battle of bulls and bears. Buyers and sellers constantly fight to take control of the market, and traders trade greed and fear. This, of course, poses a risk to traders.

As an investor, it’s up to you to decide how hands-on you want to be with your money and the risks you’re willing to take. You have some options: mutual funds or stocks.

You may decide a more hands-on approach isn’t for you. Funds allow you to take a step back while still making money. Then there are stocks.

This gives you much more control over your profit potential. It’s also a lot more risky, and you must be hands-on. Trading stocks takes practice, study, discipline, and focus.

Mutual Funds or Stocks

Should you trade mutual funds or stocks? Funds are managed professionally and pool money from many investors to purchase securities. Places such as Vanguard can set you up with a mutual fund. There’s diversification in mutual funds that can be attractive to traders and investors alike.

Many different sectors within funds exist, such as tech, retail, energy, commodities, and financials. There are many stocks in a mutual fund, but it’s usually only a small percentage.

As a result, that is both a strength and a weakness. However, if a sector is hot, the move may increase the funds only slightly because other sectors and stocks aren’t quite so hot. However, a crash is cushioned by other stocks in the portfolio. Growth in funds is limited, but so is risk.

A fund manager runs these portfolios. When purchasing, you give a dollar amount you want to spend instead of how many stocks you want to own—the fund manager then makes the purchase based on the day’s closing price.

Funds don’t fluctuate during the day. You’re given the closing price daily, so you don’t see the moves it makes during trading hours.

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Time and Fees

In mutual funds or stocks, the mutual fund strategy is long-term. The growth is slow but steady. Dividends are put into the fund. You can use these as income or reinvest them. By reinvesting dividends, you can get around the capital gains tax.

Because mutual funds can take years to grow, it’s smart to keep investing in them.

Take advantage of dollar cost averaging. This strategy minimizes risk by reducing the difference between the first investment and the current market value over a long period.

Each fund is going to have fees to pay. You will have a fund manager fee, front-end load on the first purchase, and back-end load on sale. The fees for these types of funds are complex. It’s a binding contract once you commit to the purchase, and you’re responsible for any extra fees.

Are Stocks and Mutual Funds the Same Thing?

Stocks and mutual funds are not the same thing. They do have some similarities, though. Some mutual funds are made up of stocks but are typically mixed with several asset classes.


Trading stocks gives you, as the investor, much more control over profit potential, the kinds of sectors and stocks you want to invest in, and the time frame you want. If you’re not into the lower returns of a mutual fund, stocks are for you.

You can employ many different strategies, be it penny stock trading strategies, swing trading techniques, or trading options for a living. You’re in charge. You buy and sell through a broker.

Trading stocks is a lot more risky but also much more rewarding. For example, if you place a $1,500 trade, you could close that whole investment. You can also increase it exponentially.

Risk management is key in trading stocks. You can set a stop loss. This, in turn, limits your losses. You need to know what candlestick patterns are, along with technical analysis.

There are many tools out there for you to trade stocks successfully. It’s emotional but rewarding if done right.

Final Thoughts: Mutual Funds or Stocks

Mutual funds or stocks are all up to you. Are you willing to take more risk for more reward? Do you want someone else to manage a portfolio for you? There is no right or wrong answer. What you choose is what you’re the most comfortable with.

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