Top 5 Reasons to Own Individual Stocks Instead of Mutual Funds

Many individual investors have to choose between whether they want to invest in mutual funds or individual stocks. While it is often a good idea to have some of both in your portfolio, there are some real advantages to owning individual stocks rather than a mutual fund.

The top 5 reasons to own individual

stocks instead of a mutual fund

1. Less of a limit on your potential gains- While there is truly no actual limit on your gains inside a mutual fund, since many funds own such a multitude of stocks it is hard to rack up huge gains over the long haul. If you are dealing with individual stocks, since you are taking more risk you are also able to have the possibility of higher rewards.

2. Complete control over your investment portfolio- While mutual funds allow you to invest in stocks through pooled investing, owning individual stocks certainly gives you much more control over your portfolio. If you want to be the one in charge of how your personal finances are setup owning individual stocks is a huge positive.

3.No constant expenses- Mutual funds can get very expensive over the long haul, while stocks have no associated expenses other than the fees to buy and sell the stock. Mutual funds often have loads, which can take as much as 6% of your money either when you buy into the fund or sell out of the fund. All mutual funds have expenses for professional management, and while some are reasonable, some charge 2.5% or more each year. While 2.5% a year might not sound like too much, it will add up very quickly!

4. The ability to trade whenever you want- With a mutual fund you can only buy or sell the fund as of its closing NAV price each day. Individual stocks allow you to buy or sell them at any point throughout the day, and now you can even buy or sell them in after hours trading. The majority of stocks are very liquid so you generally will not have any problems getting in and out of stocks.