Mutual funds or Stocks? Which one's the Right Choice for You?

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Both mutual funds and stocks are two of the most popular forms of investment plans not just in the UAE but all across the globe. The choice of an investment plan should depend on one’s requirements, risk tolerance capacity and long term goals. Very often investors are stuck in the dilemma of choosing the correct market-based instrument to yield maximum returns coupled with minimal risks.

Investors that have a high appetite for risk and are looking for lucrative returns investing their capital in stocks appears to be the right choice when compared to other investment plans like mutual funds or SIPs. An important point to be kept into consideration is that although investing in stocks yields high returns but the degree of risks associated with stock market investments is also very high.

Contrary to the stock market, mutual fund investments are quite safe and secure and allow investors to diversify their investment portfolio. Mutual funds offer moderate levels of returns provided the fact that the degree of risk is not very high in comparison to the stock market. If you are stuck in the quandary of choosing between mutual funds and stocks don’t worry! We will help you to find out which one is the right choice for you. Before we go ahead and shed light on the right choice, let us first understand what are mutual funds and stocks?

Mutual Funds

Mutual funds are one of the most popular forms of investment plans available in the UAE market. As the name suggests mutual funds are formed when several investors pool their capital with the common objective of yielding returns. The pool of capital created by the investors is invested in different market-based instruments in order to generate and yield returns.

One of the major benefits of investing in mutual fund investments is that the investment is carried out under the supervision of an expert fund manager that analyzes and suggests the right mutual fund for the buyer based on their existing portfolio and requirement. When an investor invests in a mutual fund investment plan they hold a small share in the market securities where their capital is invested which entitles them proportionate share in underlying securities.

Mutual funds are quite diverse and come in numerous forms. Investors can choose different mutual funds based on their goals which allows them to focus on a particular line of industries. Mutual funds generate returns in the form of dividends along with capital gains.


Stocks are another popular form of investment worldwide that is quite lucrative in comparison to other investment plans and tools. In simple terms, when you buy stocks you purchase a small portion of a company or an organization. The first income that is usually received in the form of dividends. Stocks that provide income in the form of dividends payout shares of profit to their shareholders on a regular basis i.e. typically quarterly or annually. Following this procedure allows you to facilitate a steady flow of income throughout the effective period when you own stocks. 

Another common way of using stocks as a form of investment is to sell them. The profit that you’ll receive is the difference between the selling price and the cost price of the stock. Making money using this technique is referred to as stocking. Stocks are traded on the stock market throughout the year and the price of the stock changes throughout the trading day. People investing in stocks have the choice of withdrawing as soon as the market experiences instability or a sudden crash.

Investing as a Beginner

If you are new to the world of investment and unaware of the various nuances of the plethora of available investment plans, it is recommended that you start with simpler and low risk-based investment tools. Mutual funds with equity-based securities are on the safest form of investment one should choose in such a scenario as the degree of risk is minimal and the returns are guaranteed. Furthermore, the investments are managed by expert fund managers that make it even more reliable to invest in these plans if you are a rookie.

Keeping a Track of your Investment Plans

In order to ensure that you extract the maximum out of your investment plan, it is vital to keep a systematic track of your investments. In the case of mutual fund investments investor does not need to worry about keeping track of the investment and gains since the fund manager keeps a regular track of returns, risks, and losses. However, when it comes to the stock market and stocks the case is not the same. While investing in the stock market the investor is solely responsible for keeping a track of their returns and risks hence it is crucial to keep a track of the investment tool.

Monitoring the Risk and Return

Mutual funds are quite advantageous for investors that have low-risk tolerance capacity since they diversify the investment portfolio which eventually reduces the degree of risk. Moreover, the expert assistance offered by the fund manager reduces the degree of risk associated with these investment plans and tools. Contrary to this, in the case of stocks are quite susceptible to fluctuations in the market and hence come with a high degree of risk.

In a Nutshell

Both mutual fund investments and stocks are quite popular forms of investment. While choosing the right choice of investment one should focus on several factors like the risk tolerance capacity, returns, the horizon of investment, diversification, returns and the cost of investment. With all the factors in consideration and focused approach towards long term goals, requirements one should choose the right investment plan.

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