* If you like, you can invest in both stocks and mutual funds.
* Stocks do require more time and expertise, and sell decisions are tricky.
* With funds, you don’t control all tax decisions, and fund managers may leave.
Almost all financial advisers recommend you have at least some of your money in the stock market. For investors who follow that advice, one major question is whether investing in mutual funds makes more sense than purchasing stocks individually.
There’s no simple answer, and you may even want to hold both individual stocks and mutual funds. “That tends to be what I’ve done,” says Mick Heyman, an independent financial adviser in San Diego. “I might have core index funds consisting of small-cap, large-cap and international stocks and then around that I’ll own a portfolio of 25 to 30 individual stocks.”
Diversification, fees and taxes constitute some of the issues you’ll want to take into account when making your decision.
A mutual fund provides instant diversification. “Most funds will hold at least 20 stocks, and many hold more than 50,” says Chris Larkins, a senior investment adviser at HPM Partners in Cleveland. “You can invest in small or large increments. That can be cost-efficient.”
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