Shares and mutual funds are the most popular used ways of investing money in the market for those investors who are willing to get good returns. And if you were also looking for a great way to invest your hard-earned money, then you should choose one of them according to your preferences and returns expectations. No matter which way you choose, you can easily get good returns. However, if you are new to investment, or do not have enough knowledge about the terms and conditions related to these two famous modes of investment and are not able to differentiate between these two, then read further to get a good way to differentiate between the share and the mutual funds.
At the end of the article, you will be able to differentiate between the shares and mutual funds. And you will be easily able to decide which would be a better choice for investment for yourself.
Shares are basically equity investment units which are sold by companies to raise the funds for their basic needs. By purchasing the shares of a company, you actually buy a part of ownership that makes you liable for profits and losses of the company. If you are a shareholder of a particular company, then you can easily share their profits as per your shares in the company. Also, as a shareholder, you can attend the shareholders’ meeting organized by the company and participate in making major decisions. So, if you are willing to do that, shares are the perfect investment mode for you. Search for a good share that is trending in the market, and invest on it to become a shareholder of the company.
- Risk Factor
Although by purchasing the share from a company, you own a part of the ownership, but it also makes it a much risky investment than the other modes of investment. The shares provide better profits than the mutual funds but as you own the partnership, you will also deal with the loss more frequently than the mutual funds. So, if you were looking for a type of investment which has more risk than other modes of investment, but provides better returns, then the shares would be a perfect choice for you to invest money.
- Assurance of returns
The shares are more prone to losses, as the loss per share is calculated differently and all your money is invested in the shares of only one company, so you will have to bear more loss than the mutual funds or any other investment mode. Similarly, the profit earned through the shares is better than the other modes of investment. However, you can’t be sure of getting good returns but the returns will be better if you manage the shares professionally. So, try playing on the small share for first, and if you find them feasible, then try buying the bigger shares to earn more profit.
Mutual funds are actually the pool of funds managed by the professionals who invest your money to the different shares according to their history and current values. And as they invest money in different shares, you are likely to get better returns and bear lesser losses than investing purely on one share. The investment company collects a large amount of money from the investors and then invests this amount to the assets like equity, debt,and others that provide better returns than the traditional shares. So, for all those investors who do not want to be involved in managing the shares according to their market shares, and are willing to get the better results, the mutual funds will be the best choice of investment for you. They are the indirect investment where you give your money to the investment company and then decide which are the best shares to invest in.
- Risk Factor
As the money is invested in the group of shares by the investment company, the probability of a bigger loss is almost negligible when it comes to the mutual funds. So, if you were looking for a brilliant mode of investment that not only is easy to maintain but also offers better returns, try your hands on the mutual funds.
- Assurance of returns
As the mutual fund company also invests your money to the share market, you can’t be assured of getting exact ROI as per your expectations but one thing you can be sure of is better returns than the share investment. So, if you are willing to invest your money in the market, then the mutual funds are a better option than the investing the money directly to the share market.
Major differences between Shares and Mutual Funds
- Share market investment is a direct investment of your money to the market. And on the other hand, the mutual fund company is an indirect investment where you invest the money to the investment company, and they invest the money in the share market.
- While investing the money at share market all by yourself, the management and administration must be managed by the investor all by himself. However, while investing money in the mutual fund, your money will be invested by the professionals who have the experience to deal the money.
- When you are dealing in shares, you can invest your money throughout the day. And on the other hand the mutual funds, the trading is done once in a day. The rest of things will be perfectly managed by the professionals that where your money should be invested for the better results.
- While dealing with the shares, you can get the money back at any time. It is on you that for how long you want to hold the share, and when you want to sell it. However, the mutual funds have lock-in period which is the minimum amount of time for the investment.
So, now when you are able to differentiate between the shares and mutual funds, you can easily choose the best way to invest your money and by knowing the exact differences and benefits of both the modes of investment you can also suggest your fellow co-workers to choose the best by giving them the best suggestions.