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Mutual Fund as the name suggests is an investment scheme that is shared among many investors and Institutions. Investments include stocks, commodities, bonds, or a mix thereof. There are various advantages to mutual funds. First, it alleviates the investor of having knowhow of the financial and corporate World in that the stocks, dealers etc. are selected by financial institution issuing the NFO. The traders at these institutions, who are all experienced and well learned, take decisions as to how many stocks to buy from which companies and so on. Other reasons for security are: the investment is divided among many companies. This is a distinct advantage for leisurely investors as individually they may not have sufficient amount to meet minimum buying conditions of all companies, however when the money invested by thousands of customers is huge and allows the financial institutions to diversify their investments thus providing an element of safety. Before investing in mutual funds, one should know about the performance of the mutual fund company.

Mutual Funds Vs Stocks People who are professional stock market traders take on direct stock investing. Stock investing needs technical knowledge of stocks, their charts and also skill to predict the future prices. Stock investments and stock trading can give more monetary benefits than mutual funds if done in an organized manner. This need total involvement of the trader throughout the exchanges and trading. If the company in which investment is done makes profit, the person having a stock gets a dividend. In direct stock trading diversification comes at a very high price. The buy and sell is done using a demat account. But, huge risk is involved here as you are totally dependent on the performance of the company.

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The returns on Mutual Funds are, however, low compared to Stock Trading as the financial institution itself has a layer of profit. The diversification has a negative side as well. The poorly performing companies will drive the value of investment low, whereas if an investor finds one good company to invest in, he faces no loss.

Stocks are:

· Lesser charges

· More opportunity

· Fast entry and exit

· Self-dependent

· Greater involvement

Mutual funds are:

· Less capital needed

· Diversified

· Managed by professionals

· Less involvement

Thus it can be said that mutual funds are a safer form of investment especially for those who have limited trading knowledge. It is more of a beginners and a failsafe investment strategy. When a person gains sufficient experience and instinct, he should consider stock investments as they inevitably yield higher results when they succeed.

Hence, whether to buy stock or mutual fund totally depends on the investor. If one has faith in his knowledge and experience and wants to be more involved, he could go for stock trading. But for the rookies and the people who have lesser time to be involved mutual funds is the perfect choice.

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