Thursday, March 29, 2012

Stock versus Mutual Fund

Most small investor chooses mutual fund rather than stock investment due to small money that they have. An Investor can start investment at mutual fund with $100; meanwhile, we have to provide at least $5,000 for stock investing. On the other hand, the big investor whose has much money prefer stock than the mutual fund. They realize that the stock will give them more money.
Some rich man has financial adviser that assist them to build stock portfolio. hey does not want delegate fund manager to invest their money at mutual fund. They doubt that the fund manager can beat market performance or market index. Over two-third fund manager cannot make portfolio that can reach market index.
We do not know the strategy of the fund manager. Why most of them cannot reach the index? I am afraid that the manager set aside of the return for their saving. They can use the money for cover their loss next time.
Even we have read the prospectus of the mutual fund, it does not guarantee we can appraise the good mutual fund. There is a note below prospectus "The past performance does not reflect the future performance".
The mutual fund also charge some fee for the investor. They need money for company operation and paying fund manager. However, some mutual fund has no cost that is called no load fund. The return may higher than conventional mutual fund.
Even you have so much money but you cannot order the manager to buy a stock because investor has no right to manage the fund. You do not know how the fund manager generate revenue from your money.
The manager may do short selling to generate revenue in short time. They may borrow some stock from others and sell it. When the stock decreased, the manager will buy the stock cheaply and return back to the owner.
The manager could generate hundred percent gain with short selling but I believe they will not share to the mutual fund investor.
Mutual fund withdrawn can be done everyday. However, the investor should wait until the market trading close or in the afternoon.
Meanwhile, we can sell the stock anytime we want. When the stock in peak at the morning, we may contact our broker to sell the stock. We can use the cash at that time to buy anything.

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