Stocks or Mutual Funds – Who is your best friend? | NY Zone Exchange

Why do we invest money?
The reason is simple. Security. Every individual wants to secure his future. It is an inherent human nature. Sooner or later every responsible person begins to invest money so that once he grows old and is unable to earn he need not look out at others for support.

And once you decide to invest in various financial instruments a day will soon arrive when you will be introduced to the world of stocks, because they are one of the important investment options. But there is a catch. You will need a trading account before you begin your first transaction. A trading account is a must to buy and sell stocks. Once you open an account you will then have to co-ordinate with your broker for every purchase and sale.

Mutual funds have suddenly caught up the fancy of many investors; a great alternative. Mutual funds are not as risky as stock market. So how do you pick up a mutual fund that is good for your long term plans? Here are some of the issues to be considered before signing on the dotted line.

1. Steady track Record – Select a mutual fund which grows year on year at consistent pace. Its growth is generally judged by its NAV or net asset value.
2. Consistency over a long period of time

The mutual fund you select should stand out in terms of performance. Compare it with its peers. Mutual funds are operated by highly trained and technically qualified people who with their prudence and wise decisions strive hard to keep the net asset value of your portfolio at the highest level. Mutual funds are considered long term proposals. If your investment plan is short term then you are better off with some other options.

Mutual funds typically have industry based investment plans. They also spread out the risk by investing in varied financial instruments. A mutual fund with large unused amounts of funds on hand will not give you high returns.

Online tax calculators will warn you beforehand and prevent you from splurging your finances. Finally, at the end of the financial year it will help you find out the right tax bracket.