Mutual Funds vs. Common Stock

Paper Summary:

This paper begins by providing a basic definition of both mutual funds and common stocks and explains the differences between the two. It then lists all the benefits of mutual funds and proceeds to examine the risks involved too. It then discusses the benefits of "self-building" one's own stock portfolio and also looks at the risks involved in this practice.

From the Paper:

"What exactly is the difference between mutual funds and common stock? In essence, a stock is a single entity of commerce. When you invest in a share, you own that share and make money from it (you hope) when it is sold. A mutual fund, however, is a group of investments organized by a professional manager or team of managers. When an investor buys into a mutual fund, he or she is actually buying a diverse field of investments. The fund may be solely comprised of stocks, or other items, such as bonds and securities may be added. Both items, stocks and mutual funds, have advantages and disadvantages which will be discussed in detail."

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