It is already known that investments are the way to earn large sums of money. It is important to always know what to invest in and how to invest so as to make the best possible profit.
Investment funds vs shares: advantages and disadvantages
It is already known that investments are the way to earn large sums of money. It is important to always know what to invest in and how to invest so as to make the best possible profit.
Any entrepreneur thinking of starting an investment has met 2 very popular terms in this field: investment funds and shares . But what does each mean and what is the difference between the two terms so common in the field of investment?
What are stocks and investment funds?
Shares are part of a company’s profits
Investment funds represent an investment portfolio, managed by professionals and usually follow a stock index or a sector.
What are the commissions from shares and investment funds?
In the case of shares, there are trading fees when they are bought or sold.
In the case of investment funds there are:
- annual percentage costs
- in the case of mutual funds there may be redemption or trading fees
Advantages of investment funds
- Easy diversification
- Professional administration through actively managed funds
- Investors can avoid trading costs.
Disadvantages of investment funds
- Annual expenditure rate
- Many fund investments require a minimum of $ 1,000 or more.
- They may be less efficient due to taxes.
- The return on investment funds may be lower than on individual shares
Advantages of equity investments
- Very liquid.
- No annual or permanent fees.
- Complete control over the companies in which you want to invest on the stock exchange
- Economically efficient
Disadvantages of equity investments
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- They have a higher degree of risk than investment funds
- You need to own several individual shares for proper diversification.
- It is time consuming because investors need to analyze and monitor each individual stock in their portfolio.
- You pay a commission to buy shares on the stock exchange.
