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Top ten differences, advantages, and disadvantages of individual stocks and stock mutual funds



1. A stock mutual fund is a package investment product and has many different types of stocks inside it; an individual stock represents ownership of a company

2. Stock mutual funds are more diversified than a portfolio of individual stocks1

3. Odds are a stock mutual fund will move slower than a portfolio of individual stocks2

4. There is much more upside and downside potential with individual stocks than mutual funds3

5. You only pay taxes on the profit of an individual stock when you sell it, with mutual funds you pay taxes as you own it4

6. You have much more specific information for a portfolio of individual stocks than mutual funds; Stock mutual funds are required to release their holdings every three months, while individual stocks are closely monitored by financial annalists for earnings, sales, new products, and management5

7. With stock mutual funds you do not know why they are holding a position, with individual stocks you need to understand why you would want to buy, hold, or sell a stock. With mutual funds you place your money with a manager who does this for you. You can get very specific with your stock selection process; in a stock mutual fund most the of the analysis seems to be statistically driven

8. It is more appealing to talk about ownership of an individual stock at a cocktail party, than a stock mutual fund6

9. Larger portfolios can integrate more individual stocks than smaller portfolios7

10. Individual stocks do not have an ownership cost, while stock mutual funds do


Sources: 1 http://www.investopedia.com/ask/answers/05/062305.asp     Allaria, Joe   August 2016  

2 https://thecollegeinvestor.com/8220/comparing-stock-etfs-mutual-funds/     Mario Favela   June 8, 2016

3   https://thecollegeinvestor.com/8220/comparing-stock-etfs-mutual-funds/     Mario Favela    June 8, 2016

https://www.forbes.com/sites/robrussell/2013/12/09/mutual-funds-or-stocks-which-is-better-for-you/#afd2a6811b1d   Rob Russell   December 9, 2013

5 https://www.fool.com/investing/general/2015/07/17/stocks-mutual-funds-or-etfs-how-should-you-invest.aspx   Matthew Frankel    July 17, 2015

https://www.forbes.com/sites/robrussell/2013/12/09/mutual-funds-or-stocks-which-is-better-for-you/#afd2a6811b1d   Rob Russell   December 9, 2013

7 http://www.aaii.com/journal/article/how-many-stocks-do-you-need-to-be-diversified-.touch     Daniel j. Burnside   July 2004

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