Author Topic: Stocks vs mutual funds?  (Read 165 times)

dnmccoy

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Stocks vs mutual funds?
« on: March 16, 2020, 12:38:51 PM »
As someone just getting started, is there any advantage to investing in single stocks vs mutual funds? I have my portfolio setup similar to the 3 fund portfolio idea proposed by Jack Bogle, but I keep hearing people talking about dividends they get and reinvest.

dougules

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Re: Stocks vs mutual funds?
« Reply #1 on: March 16, 2020, 01:12:05 PM »
Not generally unless you're wanting to vote on how the company is governed.  Mutual funds allow you to own a broad array of companies so it doesn't affect you much if any one doesn't do well.  You do lose a little of your returns in mutual funds to management of the fund, though, so you need to pay attention to the expense ratio. 

MustacheAndaHalf

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Re: Stocks vs mutual funds?
« Reply #2 on: March 16, 2020, 01:13:15 PM »
Mutual funds allow reinvested dividends - you can still do that.

When you buy "Vanguard Total Stock Market", you're buying a slice of ~3500 companies at once.  If any one or two companies fail, you'll be fine.  If someone buys stock in 5 companies, one company failure could mean a -20% loss.  That's called "single company risk", and is a good reason to diversify by buying mutual funds.  Especially index funds.