Today we are going to discuss the different between a mutual fund investment VS an online stock trading investment. Neither is bad and shouldn’t be taken as it is.

Mutual Funds Investment

Often people have mixed view about investing in mutual funds. Mutual funds can be of many types. Mainly you can have closed end or open end mutual funds. Investment in closed end mutual funds cannot be taken out before a certain period of time.

Mutual funds have some very common characteristics as an investment that makes them different from other types of investment.

Firstly and most importantly mutual funds are for those people who are risk averse. It is therefore never reasonable to expect fast growth of investments in mutual funds. There is another reason for mutual funds to be of slow growth. The investments made in mutual funds consist of diversified portfolios. Diversified portfolios mean that investments are made in different segments of the economy to minimize the chances of loss. On the other hand with diversification in investment the overall returns diminish in comparison to the returns that would have been reaped if the investments were made in one or two segments of the economy. One other important consideration is the investment management. All investment management is done by the mutual fund managers. This thing is good as well as bad at the same time. The goodness it has is that you don’t have to do anything. You can just sit back and relax while all the work will be done by your fund manager for that particular mutual fund. The bad thing about all this is that you have to be totally dependent on the abilities, skills, knowledge and experience of that one mutual fund manager. If he can successfully drive all your funds, you are successful. Else you are on the loosing end.

Online Stock Trading

Now let’s come to the online stock trading part. Some might argue that in stock trading you have stock brokers who can manage your money. This is a totally wrong notion. Here you have to be dependent on your own abilities to make the money out of the prevailing situation in stock trading market. It all boils down to your own knowledge about how to successfully trade and make extra money. It is therefore riskier than mutual funds. You have to vigilant all the time. You can however make much more money in shorter period of time than in case of mutual fund investments. Growth is fast but you can also loose money much faster than in mutual funds. Online stock trading is therefore recommended for all those people who have the willingness to learn more. They have the courage to face the ups and downs of the market. And they know what it means to be an online stock trader VS a mutual fund investor.