It is just instinct, that brought to justice. Success stories – few true and many false – of people, becoming a millionaire in one day, be sure to Allure anyone. But the fact is that the stock market is not just money, stock market is not everyone cup of tea.
This is our labor savings, which is at stake. So let’s be very specific about this.
Do you have enough capital?
This is just common sense that a diversified portfolio with 18-20 stocks is less risky than a portfolio of only 3-4 stocks.
However, for the retail investor, capital is usually limited. In this small money is not likely to properly diversify your portfolio. In this state, the mutual funds to expand the alternatives to be part of a well-diversified portfolio, even with little capital, like $ 100.
Of course, a portfolio can give super natural returns, but on the other hand, the risk is very high. This is a high risk high reward scheme is not suitable for an absolute majority of retail investors. It just fits a pair of expert to select investors, who have a lot of money to put on the market.
Furthermore, with moderate capital is difficult to buy expensive stocks like Google, Infosys etc. This drives us to buy low price shares. In general, higher stock prices would be a good stocks and low prices of shares can not be a good stock. Thus, with limited capital can ultimately low portfolio.
Given the fact that moderate capital can mean small and low portfolio, mutual funds, may be more preferable path for those who can not attract sufficient funds to invest
Do you have sufficient knowledge and experience?
Ok, let’s be very honest and frank here.
Do you have more experience of firms, the economy, market trends, etc., as skilled and knowledgeable professional investment company?
Is it possible to interpret the balance sheet and annual reports as easily as investment companies and to make the right conclusions?
Can you identify future growth sectors? Or those who could face recession in the near future?
In short, you are more aware than an investment company?
In 99% of cases, the answer is’ No ‘.
So why is the general retail investors to enter the industry hard areas of securities, if you have a chance to help people make the task for you?
Do you have enough time and resources?
Let’s assume that you have big bucks to invest, as well as a very clear understanding of equity markets. But if you have three important criteria, “the time and resources?
There are many companies. Some of them boom, boom, some of them were, and some will be booming. You should buy stocks that will thrive, you need to reach those whose flowering time is going to stop, and should be on those who are still in the stage of success. Timing is very crucial for the fate of stock markets.
Now the list of different stores quite frequently, and it requires constant research to keep themselves updated. Thus, there will be a lot of retail investors who can afford to set aside time to study the thousands of annual reports and track the performance of companies. In addition, annual reports, not all that is needed to research the company. How many of us can travel on the premises of the company, contact their office, and speak on their plans, hopes to earn and so on? Can you personally speak with industry experts? Even if you can do all this, it can be done on a regular basis – every day every year?
So who better to make people sound research – mutual fund with his squad of experienced research or you who are too busy with our own business / work?
In contrast to all this, the choice in favor of mutual funds is relatively much easier. In addition, he is not asking for a thorough verification. Therefore, it becomes the best option for retail investors have a yield of the stock market without being forced to commit considerable time and effort.