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You are Here : Home > Investor Education > The Stock Market

Investing in the stock market

Stocks and Mutual funds


Mutual funds are diverse stock holdings which are managed on behalf of the investors who buy into the fund. Mutual funds allow investors to take advantage of a diversified portfolio without the need of investing a large sum of money.

A diversified portfolio carries the advantage of offering protection against the rapid market losses of any particular stock. If stocks lose their value, the effect will be less if they belong to a portfolio that is spread across twenty stocks than if they belong to a portfolio that consists of a single stock.

Diversification is always a good idea in making investments. The problem for small investors is that usually don't have enough funds to buy a variety of stocks. Despite their limited funds, small investors benefit from diversification through mutual funds.

Mutual funds, aside from stocks, can be consisted of a variety of holdings that include bonds and money market instruments. Mutual funds also carry some downsides. Aside from paying some fees no matter what the performance of the funds is, individual investors also have little say in which securities have to be included in the funds or not. In addition to this, the actual value of a mutual fund share is not as precise as that of the stocks on the stock market.

Those with limited funds or investment experiences may consider investing on mutual funds. When choosing the right fund, investors have to consider how much risk they are willing to take against their expected investment returns.