Stock vs Mutual Funds

The basic difference between a stock and a mutual fund is that stock represents the number of shares held by the person in one or more companies and his ownership in those companies whereas a Mutual fund is a pool of money from different investors in order to invest in the portfolio of different assets. Let’s understand these 2 unique concepts in detail- STOCK When any company needs funding to minimize its debts or for any other reasons, either it can borrow from a financial institution in the form of debt or it can raise capital from the general public. Companies need to go through the process called IPO (Initial Public Offering) before releasing their shares in the market. After the release of shares, a person can buy the number of shares means a person is willing to contribute to a company’s capital.   MUTUAL FUNDS It is an investment that collects from different investors and invests in different securities. There are various securities such as debt instruments (government bonds, corporate bonds, etc.), money market instruments (treasury bills, participatory notes, etc.), equity (stocks), etc. These mutual funds are actively managed by professional fund managers.   Let’s understand with this simple chart-

Basis	Stock	Mutual Fund
Meaning	No. of shares held by a person representing ownership in a company	Collection of funds from different investors and investing in a portfolio of assets.
Management	Managed by investor	Managed by a professional fund manager
Risk	High	Moderate due to professional management
Ownership	Shares of a company	Shares of a fund
Value determination	Price per share	Net Asset Value (NAV)
Tax	No Tax exemption	Tax saving benefit
Voting Rights	Yes	No

  Conclusion One should understand the pros and cons of both concepts before investing. Whether you want to invest in stocks or mutual funds is a completely personal choice. In stocks, investors have the opportunity to invest in the stock market directly. They fully enjoy the profit as well as bear the loss. The investor needs to keep an eye on the stock’s performance on a regular basis. In mutual funds, investors enjoy the benefits of low risk as the fund is managed by expertise and invests in different sectors. Here, investors feel relief as they don’t need to monitor the investment constantly. The choice is yours. Happy investing!!!