Stocks or funds? Or do you want a mortgage or sublet? The dilemma in finance is full. Let’s focus on one that may not be unambiguous.
For some, buying stocks is almost a regular appreciation of money. In investment jargon, this is called investing. Each month, he issues a known amount for his favorite securities. Unlike stock traders, the long-term investor is not unnecessarily stressed. He is watching the stock market news halfway through and is not nervous when the joint-stock company declares that it will pay lower dividends, because there is an economic recession. Even if the prices of securities fall, it is not the end of the world for the investor. In short, they buy more pieces for the same money. It will certainly be appreciated in the future.
An investor investing in open-end mutual funds is not too different either. If it is more practical, it sets up a standing order for payment and no longer deals with mutual funds. Once in a while, he receives an informative statement from the investment company with which he has agreed funds. If an investor does not wear a T-shirt and does not treat funds like a stock trader, he is relatively indifferent to fluctuations in the capital markets.
Other terms affecting the share price include share premium. And also the ubiquitous dividends, which mean a regular shareholder income.
What do equity and fund investors have in common?
Investors buying shares or units in investment companies have more in common than they seem at first glance. First, they take their future firmly in their hands. Just because they invest money in a certain risk, which stocks or certain types of funds are. Secondly, they were not lazy and found at least basic information about individual investment instruments. There are a lot of people who have a savings account or a term deposit. However, those who have also set up a trading account are already less knowledgeable. Although investing in mutual funds is undoubtedly easier than buying stocks, it is still an effort to get the most out of money. People with a savings account will find it difficult to do this.
Why is investing in stocks of a higher level?
However, mutual funds form a kind of transfer station between money savers and investors. Even funders, as investors in open-end mutual funds could be called, can buy units of bond or guaranteed funds. There can be no question of the risk that is present when investing. If an investor loses a few percent when investing in such a risk-free investment, it is not a very large loss. You can realize a similar loss in percentage units even if you have savings in your current account. Here, however, the loss does not come from the unpredictability of capital markets, but from the mere effect of inflation.
A stock investor is not playing for anything. There is no experienced portfolio manager between him and his money, as is the case with mutual funds, and his business is not run by a computer. He must rely on his judgment and his own ability to analyze markets well.