Whether you’re a first-time mutual fund investor or a seasoned veteran, you should understand what differentiates single stock investments from mutual fund investing.

Picture a collection of stocks, bonds, or other securities that are purchased by a group of investors and then managed by an investment company. That’s a mutual fund. When you buy a share in a fund, you’re really buying a piece of a large, diverse portfolio. Conversely, stocks are shares of a single company. When it comes to managing an investment, some investors prefer leaving those details and skills to someone else.

You should remember that past performance is no guarantee of future results. The value of your shares will fluctuate with the changes in market conditions, and when sold may be worth more or less than the original investment amount.

On the other hand, some investors would never surrender control of their investments. Part of the thrill of investing is knowing that when they succeed it was due to their own decisions, these investors might say.Individual comfort level plays a big part in your investment choice.

Balanced funds seek to obtain the highest return consistent with a low-risk strategy. They hold a mix of common and preferred stocks, bonds and cash reserves. The mix can vary according to current market conditions. Balanced funds usually offer higher yields than pure stock funds. Balanced funds are generally the least risky of growth-oriented mutual funds.

Growth and income funds attempt to achieve both long-term growth and current income. They invest primarily in high-yield common stock, preferred stock, and convertible debt (bonds) to generate both growth and income. Because they include a mix of investments, these funds are typically less risky than growth funds.

Transacting business with stocks can be a more complicated experience. Placing buy orders, selling shares, or dictating any number of orders can be time-consuming. To some, however, that’s just part of the experience. In summary, fund investors are often attracted by the overall convenience. By way of contrast, stock investors may tend to be more comfortable with their own investing skills.

Index funds are mutual funds that attempt to match the performance of any of several market indexes. For example, a stock index fund may hold stocks that mirror the S&P 500 or the Dow Jones Industrial Average. Index funds provide a broad diversification within a single type of asset class. The performance of an unmanaged index is not indicative of the performance of any specific security. Individuals cannot invest directly in any index.

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