- - - created on 19th Sep 2016 - - -
There are so many investment channels in the world, such as stock, property, and mutual fund. And this blog is going to give you a deep look whether to invest in stock compare to mutual fund. So what is the differences between stock and mutual fund?
1. Direct / Indirect Purchase of Company Share
I believe all of you do know that buying stock means that you are buying the shares of the listed company. So do the Mutual Fund, just that you are buying those shares indirectly though the Fund Manager. In other word, you are not in direct control of which shares been bought if you are investing in Mutual Fund.
2. The Return
Generally, Stock will has higher return compare to Mutual Fund. A simple common sense, if you having a Fund Manager managing the fund for you without having you paying their salary, where do you thinking their salary come from? E.g. If you buy Share A via Stock, it can give you a return of 10% per annual, but via Mutual Fund, it maybe give you only 6-8% of return per annual. The 2-4% lesser is actually the salary of Fund Manager or any expenses for the Mutual Fund organization.
3. The Risk
Generally, Stock will has higher risk compare to Mutual Fund, especially for those investors with limited fund. Why? E.g. if you have fund of RM 5,000, perhaps you can only inveset in Share A. Whereas, for Mutual Fund where it collected RM 5,000 for 10 investors, it will has RM 50,000 that allowed them to invest in Share A, B, and C. If Share A is making a loss, with Stock you will be lossing money already, but not with Mutual Fund because Share B and C might be earning for you.
4. Invesetment Duration
I do come across some people around me said that Mutual Fund is a waste of money, don't invest in it. Well. I disagree that. It is because they are not well educated with the right knowledge, and they often compare it to Fixed Deposit. Generally, Mutual Fund has a long investment cycle (typically 5 years and above) for you to see the return. This means that within 5 years or more you must not withdraw the fund, or else you will end up make a loss or just breakeven. Whereas, stock can be long term or short term depends on the market situation when you enter the game and what kind of share you are investing.
5. Time & Efforts to be spend
People often said that buying Mutual Fund is good because you do not need to spend so much time study/analyse the stock since the Fund Manager does for you. Indeed, however, there are many Mutual Funds out there, instead of analysing the stock, in fact you need to take times to study/analyse which Mutual Fund is trusthworth and give you great return. So in short, I will said, you need to spare your time to do some research no matter which you are investing (just that you are researching the different things). NOTHING IS FREE!
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| Figure 1: Differences between Stock and Mutual Fund Summary |
So think about it, do you really want to invest in stock if you are yet to enter the market. No matter what is your choice. Always remember, investment is not magic. It takes time and efforts before you start making profits. Just some personal advises, I will prefer go for Stock instead of Mutual Fund, but choice is yours!
If you decided to go for stock investment below are some good links for your to read up. You can always Google up for more.
10 Questions to Ask Before You Buy a Stock
https://www.thestreet.com/story/10139093/1/10-things-you-should-know-before-you-buy-a-stock.html
