Stocks vs Mutual Funds

Whether to buy into stock market or putting your money into mutual fund depends very much on your personal risk level. Both avenues has its advantages and disadvantages. You can invest in both or either but always remember to do your homework before deciding. Once you get the knack of doing both, your future investing will get easier.

invest in the stock market
Buying stocks are like buying businesses, you have to know how to buy into the right business for the long term returns. If you are a working person and are buying into stock on a part time basis, go for the good fundamental stocks, one that give you good dividend return. The value of the company is dependent on the present value of its future cashflow, a business that you buy must be simple and have predictable future cashflow. A company with a turnover of RM500mil a year is considered one of the key players in the market.

Sometimes companies with new technologies look like a good opportunity to earn quick and big bucks but I would rather advise that it is safer to rule out this great opportunities if you do not understand how these businesses generate their cashflow. Avoid going with emotion when investing in stock. Use the head not the heart.

invest in mutual fund
Investing in trust or mutual funds is similar to buying stocks….the only difference is it removes the emotional strain from you because you are employing some investing expert to study the stocks and make the decision on what company is best to invest in. Other advantages are you get to diversify, you can start investing with as little as RM1000 and your money are being compounded. If you are very new to investing and your risk level is still quite low, this is a good bet. There are different categories of fund you can find here to suit your risk levels. It is liquidable, most funds take about 5 to 7 days to return the money to you if you opt to sell your fund at anytime.

Read up more on mutual funds before starting to invest. Once you decide to invest, remember that it is for long term even if you can still sell them anytime you want to. Get to your local business newspapers and check out the list of fund houses you have in your country. Past records of how the fund house did their business would be a guide as to which fund house you should put your money into. Good luck.