Today, the majority of the working population is clueless about their investment options. The financial illiteracy rate is high because several people lack financial knowledge. The basic education in the initial schooling days is missing which later causes confusion while taking any financial decision. The majority of the time, we are ignorant about the fact that financial knowledge could help us in living a better life. Another fact that adds to financial illiteracy is our traditional habit of saving which is been taught to keep aside for emergency needs. This has also developed a habit of saving but has negatively affected our investing habits.
As life is full of unforeseen events, no one can guarantee where they will land in the next few years. Whether you are a beginner or expert, it is always advised to update your knowledge in regular intervals of time. With so much chaos going around the world, the monetary needs have spiked up to support more than ever. To be honest, there are no hacks or shortcuts to earn money, you have to first understand the basics of how money works and be patient around to invest in the right portfolio.
To begin with, let us start with the most common investment options Mutual funds and stocks:
What is a Stock?
Stocks are popularly known as equity. As a beginner, it is one of the best types of investment options available. Stocks or shares are part of the company’s ownership. Owning a share represents ownership in the company. In return, you will be rewarded with a dividend. Also, fluctuation in the stock market decides the price of the stock. As an investor, you have to carefully study the market and understand what type of share that you want to invest in. This will help you in further investment in the shares. Share Market is a long-term process and you have to be patient with your shares.
To further enhance your stock knowledge—it can be categorized into two—common and preferred stocks. In the case of common stocks, you will receive dividends but the amount of dividend is not fixed. Preferred Stock: You will be paid a fixed amount of dividend.
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Pros and Cons of Stocks
What is a Mutual Fund?
https://www.youtube.com/embed/PbldLCsspgEIf you are not sure about where to invest, a mutual fund is the right option for you. It is operated by professionals who invest in different security options such as stocks, bonds, money market instruments, and other similar assets. It is matched with investment requirements and invests in the pool. In the case of mutual funds, you have no voting right as you have in shares or stocks. You can earn a return through sources such as dividends and capital gains.
Pros and Cons of Mutual Funds
Mutual Funds vs. Stocks
The Final Verdict
This blog will surely help you to understand the basics of stocks and mutual funds. Though, investment is not a cakewalk. While investing in any of these options, you need to understand your ultimate goal of investing. If you have the patience and the right skills to judge the market, you can go for stocks. And, if you want a professional to manage your investments, Mutual funds is the right option for you.
