Stocks vs. Mutual Funds

If you were to ask me which of these two investment instruments is the best, I’d rather say BOTH are best to have. If you don’t have any investments yet, you need to make a decision now where you should invest first. If you delayed planning where to put your investments, then you’re losing quite a lot of money and opportunity and maybe time to do it.

 

Investing in the stock market means you have to find a stockbroker where you’ll do the buy and sell transactions. This is the direct way of investing in stocks. It’s like you are the driver of a car, you’ll drive toward the place you wanted to go, you’re the one in control. Or imagine it like this, you have a basket and you’re the one who pick high quality eggs (stocks) to put into your basket. Same thing with stock investing, you’re the one who’ll manage on what company/ies you’ll put your money into, and that’s quite risky. The stock market is volatile and is risky, one cannot tell when the market will be up again when it’s down and vice-versa. But one thing’s for sure if you use the PCA (Peso Cost Averaging) method, that is investing for the long term 10+ years, it’s really worth the risk. Just imagine investing in stocks like you’re putting your money on a time deposit but guarantees a higher return than the latter. As they say “no pain, no gain,” waiting is difficult and painful but if you have a financial goal in life just stick to it and focus on that goal.

 

Investing in mutual funds means you have to find a financial institution/s that will help you manage your funds in investing. It’s like you ride a car and the driver (fund manager) is the one who’ll drive you to the place where you wanted to go. Or like this, you bought a basket with high quality eggs (stocks) already. With mutual funds, a fund manager is the one who manages what company/ies he will put your money into. There are various types of fund allocations in mutual funds, some of these are equity (stocks), bond, money market, balanced fund, etc. These corresponds to the type of investor you are. If you are an aggressive investor, go for equity fund; if you are a moderate investor, go for balanced fund; if you’re the conservative type, go for money market fund. Just remember a few points in terms of investing. For aggressive investors this is what they have in mind – the higher the risk, the higher the return. For moderate investors – moderate risk, moderate return. For conservative type of investors, low risk means low return.

 

Set a financial goal for yourself, write it down and make it happen. Set aside a portion of your income for investment and savings (for liquidity purpose).

 

 

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