• Skip to main content
  • Skip to secondary menu
  • Skip to primary sidebar
  • Skip to footer
  • HOME
  • ABOUT

The Fortunate Investor

Investing, Business, Saving, Debt, Money, Retirement, Taxes and Family Finances

  • Business
  • Invest Your Money
  • Save Money
  • Get Out of Debt
  • Make Money
  • Family & Money
  • Taxes
  • Retirement
    • Retirement Calculator
You are here: Home / Investing / Mutual Funds vs Stocks: What’s the Difference?

Mutual Funds vs Stocks: What’s the Difference?

December 29, 2021 By The Fortunate Investor | This article may contain affiliate links. For more information visit our Disclosure

Tweet
Share
Pin
Share
Share

Mutual Funds vs Stocks: What’s the Difference?

Embarking on the investing journey may seem exciting, but it can easily become difficult and overwhelming. There are so many things for you to learn, and the stakes are real.

How do you ensure your investments are successful and that you won’t lose money? You’ll have to know the different types of investment options and choose the one most suitable for you! Keep reading to find out the key differences between investing in mutual funds vs stocks.

Table of Contents

  • What Are Mutual Funds?
  • What Does it Mean to Invest in Stocks?
  • Differences Between Mutual Funds vs Stocks
    • Risk Involved
    • Potential Returns From Investment
  • What to Consider When Investing in Stocks vs Mutual Funds

What Are Mutual Funds?

Mutual funds involve pooling money from different investors, before using that capital to invest in different stocks or securities. When you buy a share in the mutual fund, you have ownership in the returns from the investment that the fund will generate.

What Does it Mean to Invest in Stocks?

Investing in stocks is a more straightforward concept. You purchase stocks in a company you are interested in, and this will offer you partial ownership of the business. When the company earns profits, you can receive dividends.

Differences Between Mutual Funds vs Stocks

While both mutual funds and stocks involve investing in companies and businesses, there are some stark differences between them. These are some of the things you need to consider before choosing one option over the other.

Risk Involved

When it comes to investing, a great rule of thumb is that diversifying your portfolio reduces your risk. If one of your investment choices fails (if the company goes bankrupt or is not doing well), you will still have others that can generate returns for you. This allows you to maintain financial stability.

Investing in individual stocks will involve more risk than mutual funds because funds will involve more diversification. They can include investing in bonds, different stocks, and more. You can find out more about why individual stock selection may not be the best idea on rvwwealth.com.

Potential Returns From Investment

Another difference between mutual funds vs stocks is that stocks can result in higher returns from investment. Stocks can be quite volatile in comparison, so your investment can skyrocket in value very quickly (but the risks are also higher).

On the other hand, mutual funds involve a smaller amount of investment in different securities. While this is stable and low-risk, it can mean that the returns will generally be smaller than simply investing in stocks.

What to Consider When Investing in Stocks vs Mutual Funds

If you want to start investing, you will need to understand the differences between mutual funds vs stocks. While they both can generate returns for you, one may be more suitable than the other.

The key differences are that individual stocks carry more risk, whereas mutual funds may result in lower returns from investment over time. When making a decision, you will have to find out whether you want to engage in a high-risk, high-returns game or if you would like to play it safe at first.

Did you find this article helpful? Check out more financial tips on our blog.

Primary Sidebar

Popular Articles

Tips for Dealing with Conflict in the Workplace: What You Need to Know

No one expects to be best friends with all of their coworkers, but at the same time, not getting … Read More about Tips for Dealing with Conflict in the Workplace: What You Need to Know

Final Checks To Carry Out Before A Safety Audit

Final Checks To Carry Out Before A Safety Audit

Keeping the people in your business safe and sound is one of the primary responsibilities you have … Read More about Final Checks To Carry Out Before A Safety Audit

Use Your Home to Your Benefit When You Want to Make Money

Use Your Home to Your Benefit When You Want to Make Money

If you're a homeowner, you're in a fortunate position. You might still be paying off a mortgage, … Read More about Use Your Home to Your Benefit When You Want to Make Money

How to ensure success when entering the property market

How to ensure success when entering the property market

Are you thinking about entering a new market, with the property market being high on your list? The … Read More about How to ensure success when entering the property market

Do You Know The Cost Of Your Retirement

Do You Know The Cost Of Your Retirement?

Are you already thinking about retirement? Nobody should wish their life away, but that doesn’t mean … Read More about Do You Know The Cost Of Your Retirement?

Footer

TOPICS

SAVE MONEY
INVEST MONEY
REDUCE DEBT
MAKE MONEY
FAMILY & MONEY
TAXES
START A BUSINESS
RETIREMENT

THE FORTUNATE INVESTOR

ABOUT US
ADVERTISE
CONTACT US

The Fortunate Investor focuses on personal finance topics to build wealth. Topics include saving money, investing, managing debt, family and money, taxes, making money, college planning, starting a business, coupons and retirement.

SOCIAL MEDIA

FACEBOOK
TWITTER
PINTEREST
YOUTUBE

Copyright © 2023 Fortunate Investor. All Rights Reserved. | Disclaimer & Disclosure | Privacy Policy | Terms of Service