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-
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!!!
|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.
|Managed by investor
|Managed by a professional fund manager
|Moderate due to professional management
|Shares of a company
|Shares of a fund
|Price per share
|Net Asset Value (NAV)
|No Tax exemption
|Tax saving benefit