Stock Market Investing and Mutual Fund
Stock Mutual Funds
PROS • Easy diversification, as each fund owns small pieces of many investments. • Professional management available via actively managed funds. • Investors can typically avoid trade costs. • Many index funds and ETFs have low ongoing fees. • Convenient and less time-intensive for the investor.
CON • Annual expense ratios. S funds have investment minimums of • Many $1,000 or more. • Typically trade only once per day, after the market closes. However, ETFs trade on an exchange like stocks. • Can be less tax-efficient.
Individual stocks
PROS • Highly liquid. • No annual or ongoing fees. • Complete control over the companies you choose to invest in. • Tax-efficient, as you can control capital gains by timing when you buy or sell.
CON • Carry more risk than mutual funds. Shold many individual stocks to adequately • Must
diversify. • Time-intensive, as investors must research and follow each individual stock in their portfolio. • You'll generally pay a commission to buy or sell.
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