All investors whether they are beginners or experienced are wondering the same thing: which is the best investment solution, stocks or mutual funds? No one knows the correct answer but both options have their fans.
The mutual funds represents a huge amount of money collected from a large number of investors used to buy lots of different stocks, bonds, and/or other assets that meet the company’s investment criteria. When you buy shares to a mutual fund you become a shareholder and your money will be managed by the mutual fund money management experts.
All you need to do to invest in the mutual funds is to buy shares. After that you can sit back and relax while experts manage your money and make profits for you. Mutual funds investments carry a low amount of risk, so they are preferred by prudent investors.
On the other hand, stocks are shares of ownership in a company that can be brought through a broker at a certain price per share. The shares price varies according to the market trends, so stocks can be very volatile.
Stocks investments are riskier than mutual funds but the history has shown that financial markets always recover, so stocks should be considered investments for the long run. Historically, the stock market has averaged annual returns of 11 percent per year. This makes stocks one of the most profitable investments available to the public.
Both, mutual funds and stocks can be very good long term investments, but over the longer periods of time, the stocks will overcome the safer but less profitable mutual funds.