This is the age old debate among active and passive investors. For those that don’t know what “funds vs. stocks” means, it is asking, “is it better to own individual stocks or just buy a fund and let the manager decided what to buy”.
The answer, well, it depends on how active you are in investing. As you can probably realize, the fund manager does not work for free, in fact, they earn a very good living based on how much money they manage. So who pays the managers? The long and short of it, is that you do. Those are those fees and fee schedules you see on the mutal fund prospectus.
If you are willing to put your own time and research in, you can do exactly what the fund manager does, and that is pick stocks. The best part is, every 90 days, the fund has to publish it’s top 10 holding so you can see what the fund manager likes, and doesn’t like. Most funds don’t trade stocks like individuals, so whatever their top 10 holding are 90 days ago, 8 or 9 will be the same this time around.
Another area affecting your decision in “funds vs. stocks” is your personality. Some people just don’t like to manage their investments and would rather pay a professional to do it. So, it is up to you. How much time can you spend managing your investments? Do you have the stomach for the market’s twists and turns?
The fees on funds tend to run higher than ETF’s and ETF’s can get you almost the same returns and diversification that mutal funds can get you.
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