INDIVIDUAL STOCK INVESTMENT RISKIER THAN MUTUAL FUND INVESTMENT

2007-05-02 10:04:19

( Health )



It is riskier buying individual stock compared to investing your money in mutual funds. Investing in the latter is convenient, cheaper and diversified. Passive investors benefit more from mutual fund investment than directly investing in an individual stock.

Trading in individual stock requires certain skills and a lot of training to efficiently manage this type of investment. Also, it takes a lot of research and trend setting to determine which individual stock has the potential to provide highest yield in the market. Investors who have no time to acquire the skills necessary to become efficient in individual stock investment are best to invest their money in mutual funds.

Mutual funds diversify your investments across various portfolios making it less risky when parts of the portfolio do not perform well in the market. Also, fund managers are available to manage your investment portfolio and to ensure that it performs on its optimum level. These fund managers analyze what effective portfolio combination is best to invest to ensure positive and higher earnings for your investments.

Investors will only have to wait for reports of mutual fund companies on the performance of their investments. On the other hand, individual stock investment needs closer monitoring of individual investors in terms of its daily performance.

Investments make your money work for you. However, there is a risk that accompanies every investment decision you make As much as possible the ideal way to invest is to lower the risk involved on your investment by choosing a diversified portfolio to invest like the one offered by mutual funds. You can instruct the mutual fund company of your choice to transfer your investment earnings to your individual savings account.

However, if you are an investor who thrives on risk to maximize profits from your investments then investing in individual stock might be the tool to address your investment needs. Make sure, though, that you are ready for any losses that you might incur from this type of investment.


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