What is the difference between mutual funds and the stock market?


Last Update há 3 anos

Mutual funds and stocks entail plenty of differences, including their nature of ownership, investment, management, risk-reward, among others. The main key distinction between mutual funds and stocks is their type of ownership. Mutual funds are regulated by an asset management company that collates funds from varying investors, thereby having shares of the fund depending on the money invested. On the other hand, the stock market is a venue where individual people can buy or sell shares of companies.

In short,

Stocks = shares of a company

Mutual funds = shares of a fund

Another area that differentiates the two is their risk factor. Investing in stocks typically comes with higher risks as opposed to mutual funds that pose relatively low risks because of professional management. In other words, stocks are usually managed by a sole investor while mutual funds are regulated by a fund manager. Besides this, value determination is another differentiator because the value of the stocks held by an investor is determined by the price of the share during the exchange, whereas mutual funds’ value depends on its net asset value (NAV). 

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