When you’re not now satisfied the interest of your bank accounts neither from savings nor time deposit. You’re now looking for a new investment, but are we ready on this? Don’t be fooled for the sweet of success stories, it’s a common sayings that to “count first the risk before the profits”. Yes, this is true… it’s just so sad that I’ve learned it on a hard way. (That’s another story though).

First and foremost, we must understand the two options; stocks and mutual funds.

STOCKS – In a time we purchased a stock shares, we gained an ownership to the company.  Every quarter, the company we’ve invested will review the financial net income and losses. If ever there are earnings, it will be distributed to the shareholders in a form of dividends. The amount of dividend you’ll be receipt will depend on how many shares you own to the company.

For example, Php0.5/share is the declared dividend and you have 1000 shares to that company… you’ll receive Php500.00 on the payment date. Aside from cash dividend, other company gives number of shares instead.

The shareholder can sell their stock on the market to the new trader or investor willing to buy at your preferred price. If you sell your shares lower from the amount you’ve bought it, this will make you loss your money value. If not, it makes you profits!

Example is, when you bought a stock shares at value of Php10.00/share then sell it at Php15.00/share. You’ve make a profit of 50.0%.

Means, in stock investment, we can do profit from the dividend and same from selling our shares at higher price against the price we’ve bought it. Just be cautious on how long you’ve been holding those stock shares before you have managed to sell it at profitable price. Since money value will deficits in time.

MUTUAL FUNDS – Are a collective investment schemes which pooled money from shareholders invested in a diversified portfolio, which may include money market, bond or equity securities. There’s a fund manager assigned to manage the pooled money, his team will do all the research for us and execute buy and sells stock shares or to other investments. To be part of the pooled money, we must also purchase shares from the mutual fund company which is commonly named as Net Asset Value (NAVs). The price of NAVs will eventually go up and down, depending on the financial performance of the company.

We can make profit on investing mutual fund through selling our shares or NAVs at the higher price against the time we bought it. It makes same with the Stock Investment; the only difference is that, in Mutual Funds… our money is managed by professional investment managers and his team to make watched our money grow.

To compare the two, ideally, Mutual Funds are way better to invest specially for a newbie or those with limited funds and investing experienced. Since there are people who will manage our money for us, but we must also remember that we need to pay or compensate them on this. There are usually fees that must be paid on every transaction closed, no matter how our funds perform. The other downside of mutual funds is that we can’t decide which investments can be included in the portfolio. It’s there play! However, we have a choices which category of funds we wanted to invest; high risk, moderate, and low risk investment. And we all know that the higher the risk gives higher chances of profit, isn’t this what we after for?

Since we’ve touched now the risk matter, Stock investment is on the top of Mutual Fund. For those who wanted to have access on this vehicle, usually chooses the stock investment. Stock investment has the greater potential for profit than mutual funds, but also carries verities of risk and all higher than Mutual Funds investment. Now, we are the one, who do the research and executes when to buy or sell our shares. The problem here, for a small investor like us have a limited funds to buy a various company stock shares for better diversification of our own portfolio. This where Mutual Funds give better punched, since small investors can benefits from their diversified pooled funds.

Which of the two is a best choice?
Clearly, the answer will vary on our own, depending on our risk tolerances and how much money are we willing to invest. Better to ask also our self how versed are we in the ways of the financial market. How much time and effort we wanted to put in for research especially if we choose the Stock investment since it’s a very risky way but give higher profit returns. And Mutual Funds can offer us diversified portfolio and the security knowing that our money is being managed by a much experienced team working full time on our behalf. 

Stocks versus Mutual Funds?
None wins! It’s all up to us…

I hope the above data or information can make up your mind where you suit in to invest. At least the point is, we invested on our own country... Philippines!

Angat Pinoy.