Hello The newbies, you must be familiar with some of the investment instruments that we will discuss this time, right? Yep , stocks and mutual funds.
What you need to know beforehand is that shares are proof of ownership of the part of the company being purchased. Meanwhile, according to the Capital Market Law No. 8/1995, mutual funds are places to collect public funds whose management is carried out by an investment manager.
Mutual funds are further divided into several types, ranging from money market mutual funds , fixed income, mixed, to stocks. As it turns out, the two are very different types of investment instruments .
Also Read: Mutual Funds VS Property VS Gold, Which is Better?
What is the Difference Between Mutual Funds and Stocks?
Well, until now, in fact there are still many people who do not really understand and understand the difference between these two instruments. So, when they want to start investing, they tend to be confused about choosing between the two.
Therefore, please read to the end the explanation below regarding some of the basic differences between mutual funds and stocks.
1. The Risks of Mutual Funds and Stocks
The first fundamental difference between stocks and mutual funds is the level of risk they are given. Stocks certainly have a greater risk than mutual funds.
This is due to more volatile stock movements and also the opportunity for higher yields. The greater the opportunity for profit that can be received, the risk will be greater.
In addition, personal decisions in stock investment also open up high risk opportunities if investors lack experience or lack of education.
While the risk in mutual funds can be said to be smaller. Compared to stocks, the movement of mutual funds tends to be more stable, especially in money market funds.
Not only that, the role of investment managers who are more experienced in mutual funds will certainly reduce the risks that can be caused due to lack of education in investment.
2. Mutual Fund and Stock Investment Manager
The second difference has actually been slightly discussed in the first point. Yep , that's right, fund managers in mutual funds and stocks are very different from each other.
If our mutual funds and investments are managed directly by an experienced and educated investment manager, in stock instruments, we must manage our funds independently.
The positive point of this is that we can be more free and flexible in making personal decisions. While the negative point is that there is a greater opportunity for errors in making investment decisions. Therefore, don't forget to always learn and add knowledge in the investment world, The newbies.
Opportunities Return Mutual Funds and Stocks
The third fundamental difference is the opportunity for return or profit that can be obtained. Stocks have greater profit opportunities than mutual funds, especially if they are invested in the long term.
Also Read: 10 Advantages of Mutual Fund Investment
In addition, self-management that is carried out on stock investments can of course reduce the capital we spend on the obligation to pay fees to investment management companies such as those in mutual funds.
Choose Mutual Fund or Stock?
Between stocks and mutual funds, of course, each has advantages and disadvantages that cannot be compared apple to apple . The choice between these two types of investment instruments, namely stocks and mutual funds, should be considered for reasons that can be the basic factors.
Well, here are some basic factors that you can pay attention to when choosing between these two types of investment instruments. In addition, don't forget to learn first, The newbies before going directly into the investment world, so that you are more understanding and mature in making investment decisions and strategies.
Some of the main factors that can be used as the basis for the selection, among others:
1. Adjust to Investment Objectives
The choice of stock or mutual fund investment instruments should be based on the investment or financial goals you want to achieve. If you want to make long-term investments, for example more than five years, then stocks can be used as an investment instrument that is more optimal than mutual funds.
However, if you want to carry out long-term investments through mutual funds, you can also choose the appropriate mutual fund instrument, such as stock mutual funds. As for short-term investments, stocks are not suitable for use even though there are still profit opportunities.
In addition, other types of mutual funds can also be used for other investment purposes, such as emergency funds which tend to be suitable if collected through money market mutual funds.
2. Adjust to the Risk Profile
In addition to investment objectives, risk profile is also an important consideration in choosing the type of investment instrument for stocks or mutual funds. Of course, everyone has a different risk profile from one another.
There are people who dare to take high risks and there are also people who prefer to prioritize certainty. If you are the type who dares to take high risks, maybe stocks are an option to choose from. Meanwhile, if you prioritize higher security and certainty, mutual funds can be a suitable choice.
3. Don't Forget Diversification
In addition to the two basic considerations above, the reasons for diversification are also a very important concern. Diversification is an effort to vary the type of investment, so that the profits obtained are maximized and the risks borne can be minimized.
If you already have extensive education and experience, later on, you will be able to run several different types of investment instruments at once, such as mutual funds and stocks, according to your respective investment goals.
That's a little picture of the basic differences that stocks and mutual funds have and the reasons that must be considered in choosing between the two investment instruments.
Hopefully with this article, you can know and understand more about the ins and outs of investing, The newbies,. Always be enthusiastic and don't forget to continue to enrich your investment knowledge and experience.
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