Do you like comparing stocks versus mutual funds? Do you want to know, which type of investment is an ideal option for you? These are the four different criteria, which can be used as a litmus test to decide the kind of investment that suits you the best.
Here is letting you know how:
Age factor counts
If you are typically in your 20s to 30s belt, you can start building your investment portfolio with the help of mutual funds. You need to start off, with a very minimum capital and you can find that your investment keeps growing at a gradual pace. For beginner investors, mutual funds offer a tremendous scope for growth and your funds will be invested in diversified forms of revenue generating sources. Hence, you can also unleash the fabulous benefits of having a diversified investment portfolio.
On the other hand, if you belong to your late 40’s up until 70’s, and you are a seasoned investor, you can invest your money in stocks. Decades of exposure to the financial market helps you gauge the right type of equities, shares or stocks; you need to invest your money in. So the sophisticated form of Investment portfolio is meant for those who have been dealing with investments for quite some time.
Are you worried about your tax liability?
If paying up huge taxes is your sole concern, you can consider investing money in stocks. Your investment portfolio manager will inform you as to when you can accrue your dividends and take up your gains or losses that are accrued on your Demat account. Hence investing your money with stocks gives you a comprehensive tax savers plan
On the contrary, when you take mutual funds as the form of investment, you need to pay capital gain taxes irrespective of the fact whether the mutual funds are plummeting in value or dropping off in their value. There was a particular mutual fund whose value tremendously dropped on account of the 2008 recession. But, the investors still had to pay their capital gain taxes.
Do you want to have a better control over your investment portfolio?
Mutual funds are like an auto-pilot. You just invest your money in a portfolio and forget about it altogether. You can come back and review after years or even decades, to know the appreciated value of your investment portfolio. But you hardly have a clue on the type of companies or financial segments your money is invested in. Hence you are hardly aware of market instabilities affecting your investments on the whole. This form of investment is a black box investment. In other words, the transparency factor, with regard to mutual funds is bare minimum.
Investing your money with stocks keeps you well informed on what is happening with the companies you have invested your money in. The annual general meeting schedules are issued to you in the form of a booklet. You know how much capital is invested in shares or stakeholders and other sources. Hence with stocks, you are more in control of your investment portfolio and you have a clearer picture of what is happening with your money. You will also be taking too many risks as stock markets are very volatile.
Do you want your investment portfolio to be a customized one?
Well managed stock portfolios are like the limousine services. These are customized or tailor made to suit your expectation in terms of tax mitigation, prudent risk management, tactical investment strategies and income goals. You are provided with personalized investment navigation as it is you who is in complete control of your investment portfolio.
Investing your money with stocks can be compared to that of a subway. You just get on and you get off the subway along with so many others and there isn’t any form of customized or tailor-made investment plans for you to plan your income or tax savings. Although you can select high-end mutual funds, you will need to shell out additional brokerage or maintenance fees to the tune of 3 to 5% annually. For all said and done, the transparency factor with regards to mutual funds is reduced to the bare minimum.
We have seen four factors evaluating the benefits and limitations of stocks versus mutual funds. It is ultimately you, who needs to decide the type of investment that is right for you.
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