Mutual Funds vs Individual Stocks – 5 Tips to Help You Make The Right Choice


Do you usually fly solo or are you more of a team player? Knowing this about yourself can really help you while deciding whether you want to invest in mutual funds or individual stocks. A general notion about individual stocks is that it is more of a sophisticated domain that gives you greater control over your investment; however, mutual funds are not bad either as they have an ease that comes along with their usage.

Truth be told, both of them are equally good investment options and their viability rides on your financial requirements. One could even venture to say it’s like comparing apples to oranges.

Singaporeans with a keen eye for growth opportunities and strong aptitude for stock analysis may prefer to put their money where their mouth is and opt for individual stocks. On the other hand, not everyone possesses the financial savvy to decode stock market trends or have the additional time needed to invest in their supervision. For such people, mutual funds may be a friendlier investment option.

It all depends on your preferences and comfort level, based on which you may decide to take up either of the two options. To help you decide, below are a few things that you could consider while making that decision:

  1. Retaining Control

If you come from that school of thought that believes in doing your things yourself, then you would find it unnecessary to pay a manager to hold on to your stocks and would prefer monitoring them on your own. This would lead to you gaining complete control over your investment. It would also lead to some money being saved thanks to the exit of a middle man.

It is true that Mutual funds put a little bit of a restriction on your investments so for complete freedom, you may choose to invest in Individual stocks.

  1. Leveraging Professional Help

The other school of thought is, obviously, that an expert would know much better. If you feel like you do not have the sufficient time to track and analyze the performance of individual stocks, or generally lack interest in this area, then mutual funds are right down your alley.

What you can do is either make all your investments through mutual funds or maybe invest in individual stocks that lie within the realm of your knowledge. The rest of the investment may be made by paying a manager to do the same.

  1. Low maintenance portfolio

There are various reasons for people to desire a low maintenance investment portfolio. Two major reasons are – you not being interested or your spouse not being interested. The first reason is very self explanatory; you are being smart in deciding to invest your money, but you generally lack interest in finances.

Thus, a mutual fund investment should be good for you as all you need to do is pay someone to do the important work.

The second reason is out of love. Your better half might be the one who has no interest in such topics. Should something happen to you then he/she would need to take up the things you were doing including monitoring investments.

  1. Appetite for risk

Individual stocks require a lot of first hand research, which once done, could lead up to you getting amazing deals. However, they also carry a high risk. Yes, individual stocks hold the potential to give much greater returns in comparison to mutual funds but they can even incur great losses as compared to mutual funds.

So, if you are someone who loses their sleep at night over stocks, then individual stock investment is not for you. You are not a risk taker and feel more secure when things are going by the book. Thus, investing in mutual funds is a much better option for you.

  1. Get the best of both worlds

If you prioritize stability in life, but are also looking for a little bit of fun, some adventure to keep things interesting then the best option for you would be investing in both mutual funds as well as individual stocks.

The best way to go about it is investing most of your assets, around eighty to ninety percent, in mutual funds and the rest of it in individual stocks. This would result in a secure investment and will keep your interest in the stock market alive.

These are a few things you might want to think about while deciding what kind of an investment to go for. More than researching on the above two kinds of investments, you need to understand what works best for your portfolio goals. Once your goals are locked in your crosshairs, it becomes a lot easier to take a winning shot.


What do you think?