Compare Equity Investments Vs Mutual Funds
With so many options available for investing, it can be very confusing for a person. He or she wonders whether they should go for equity investing or mutual funds. However, every person should first compare equity investments vs mutual funds and then make a choice.
The first thing to remember is that these two investment vehicles are made for two different types of investors. Equity investments are made for big players who have a lot of funds available, while mutual funds can be for anyone, from a novice in investing to a highly wealthy person.
If an investor feels that there is a company he or she should invest in and this investment will reap a lot of profits, then they go for equity investments. Usually this kind of investment is done in start ups where there is high possibility of handsome returns. It is not always necessary that for equity investments a person needs a lot of money. It can also be done with a paltry amount. In return, the person will own a certain percentage of the business. However, usually investors with a lot of money tend to opt for these kinds of investments.
The money invested into a business is used to grow the business with the hope that it can be traded in the stock market and more people will be able to purchase shares in the company.
On the other hand, mutual funds are different. Here there are stocks of different companies clubbed together and an investor invests in all the stocks at the same time. The main reason for this kind of investment vehicle is to spread the risk and also increase the chances of reaping a profit. If one company in the mutual fund performs badly, the overall portfolio is not affected as other companies maybe performing quite well. The good thing about mutual funds is that people do not need to invest too much money and it is one of the best ways to invest for one's retirement. There are specialized companies that deal with mutual funds and each fund has a fund manager that handles the fund. So, the investor does not have to do anything other than invest.
When you compare equity investments vs mutual funds, the risk is less in mutual funds and one does not need large amounts of money to invest in them.
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