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Stocks vs Bonds vs Mutual Funds: Which is Better for Investors?

Everyone has different investment goals and so are their investment options. If you are planning to save money for your future goals like retirement planning, child marriage or simply a foreign trip, parking your funds in a bank account may not be that beneficial for you. It is surely one of the safest bets and will offer you interest as well. But there are plenty of better investment options available out there.

Accomplishing your long-term goals require you to go that extra mile. It requires you to invest your money in options like stocks, mutual funds etc. These assets may have a high risk, but they do offer higher returns as well which will help you in achieving your goal more efficiently. However, choosing an investment instrument depends on a number of factors. Some of the factors worth consideration before investing including your risk appetite, investment goal, income, liabilities etc.

Today, we will take a look at some of the most preferred investment options by the modern investors including stocks, bonds and mutual funds.

Table of Content

Investing in Stocks

Investing in stocks require you to have a demat account and a trading account. When you buy a stock, you are actually buying ownership in the company. If the company performs well and generates profit, the prices of the stocks may rise, and you may sell them to extract profits. In case, the company does not perform that well and there is a decline in the stock prices, you may possibly end up in a loss.

Technical analysis and fundamental analysis help up to an extent for studying the performance of a stock. If you are not a seasoned investor, you can take the help of a registered investment advisor who can perform the research work and provide you recommendations based out on it.

Stocks have the potential of providing unlimited profits, however they are also amongst the riskiest investment option amongst bonds, stocks and mutual funds.

Investing in Bonds

Bonds are issued by government, municipal corporations or government affiliated organizations. In some cases, bonds may also be issued by corporate companies. Such bonds are known as corporate bonds. Bonds are issued for generating capital for financing debt. Raising bond is preferred by such entities because getting a loan from bank usually attracts higher interest rate than bonds.

When you buy a bond, you are actually lending capital to the company or government and you will get fixed interest on it. Bonds are amongst the safest investment option amongst stocks, bonds and mutual funds but have limited returns.

Investing in Mutual Funds

Over the last few years, there has been a rapid spike in the number of mutual fund investors across the country. Mutual funds accumulate funds from lakhs of investors and invest it in numerous asset classes ranging from stocks, bonds, commodities and many others. There is a fund manager associated with every fund who manages all the fund activities. Mutual funds are actively managed funds which means that the fund manager regularly monitors the progress of the fund and makes timely alterations as and when required.

Conclusion

Before choosing any investment options it is important that you thoroughly evaluate your investment and financial profile. You should have an updated risk profile analysis and details of your income and liabilities to find out the amount which you can spare for investing. Once this is sorted, you can choose the perfect investment option which will cater to your needs. It is important to note that with every investment option there is some sort of risk associated.

Happy Investing!

Stocks vs Bonds vs Mutual Funds: Which is Better for Investors?

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Stocks vs Bonds vs Mutual Funds

Investing in Stocks

Investing in Bonds

Investing in Mutual Funds

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