Difference Between Stocks and Mutual Funds

There are many different types of stocks such as preferred stocks, common stocks, growth stocks, etc. When you buy a stock, you have ownership rights in the issuing company. On the other hand, when you buy a mutual fund, you are not investing in the mutual fund company itself but in a portfolio of investments. Mutual funds are managed by professional money managers to pool money from investors and invest in different types of securities such as stocks, bonds, and so on.

Following are the main differences between stocks and mutual funds:

1) A mutual fund is considered less risky because it can help you diversify your portfolio with minimum investment, which means investing in different companies. Unlike mutual funds, stock has higher risk since investors are investing directly in one company or a few companies.

2) Stocks are usually managed individually or by a stockbroker, whereas mutual funds are generally managed by a professional money managers who are in a better position to understand the markets than individual investor.

3) When investing in stocks, you are in full control of the stocks portfolio. With mutual funds, the professional fund managers make all decisions about which securities to buy and sell.

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