Should I Invest in Stocks or Mutual Funds
For some investors, buying carefully picked stocks in well-managed, successful companies is a smart choice. As value investors, this route assumes that the important groundwork is done through analysis and comparison, and that the time is taken to understand not only the profit potential, but also the risk.
Buying stocks directly is not the only way to invest; however, many people who start out working with others or focusing on mutual funds eventually learn enough about the market that they feel comfortable buying stocks directly.
It's a matter of personal choice and comfort, not to mention experience. A mutual fund is a conduit investment
, meaning the fund's management handles portfolio decisions for its investors and passes through all profits in the form of dividends, interest, and capital gains. The fund acts as a conduit between the components of the portfolio and each investor.
By Michael C. Thomsett