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Should I Invest in Stocks or Mutual Funds?

Stocks and mutual funds are one of the best investment options. However, both these investment options differ from each other by a large magnitude, and if one needs to choose between them, then they will have to analyze their risk-reward capability thoroughly.

If you want to gain higher returns, then you must bear higher risk in your investments. If you just want to safeguard your funds, then you can invest in low-risk investment options.


The Difference Between Mutual Funds and Stocks

Stocks are purely equity components and have a higher risk-reward system. When you buy a share, you become a proportionate owner of the corporation, and hence, whatever profit or losses the company endures, you will endure the same fate. Investing in the right stock comes with sincere research that requires one to study the market and analyze the company’s financial statements. Stocks offer good liquidity that helps you to opt out from your investment whenever you want during market hours.

Mutual funds can fit low to high risk investment options because of the variety they offer in their investment options. There are three types of mutual funds:

       Equity mutual funds - High risk-reward option and have a minimum of 60% of its investment portfolio in equity shares.

       Debt mutual funds - This is for low risk investors who want to safeguard their funds.

       Hybrid mutual funds - Investors who have intermediate risk levels can invest in hybrid funds. They offer both equity and debt components in their portfolio.

Mutual funds are managed by qualified fund managers, and they allocate your funds in the right assets as per their research.

Choosing the right type of investment option between stocks and mutual funds majorly depends on your investment profile. Thus, be sure to analyze your investment profile thoroughly before investing.

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