Stocks (also known as the shares) provide ownership interest to the investors in a company. Many companies, in a stock market, stocks are issued to the general public to raise the capital. The total number of shares or the total value of all the outstanding stocks is equal to the value of the company. In simple words, when investors buy the stocks of a company, they ultimately invest in the company and as a result, acquire the portion of ownership in the company.
When the value of the stock increases, this result in the increased profit of the investor, and similarly when the value of a share decrease the shareholder or the investor faces the loss. Stocks are of two types; i.e. common stocks and preferred stocks. A company first offered stocks through an IPO (Initial Public Offer) and after that, these stocks are traded on the stock exchange market.
The mutual fund is collective money where the investor’s money is gathered in a pool and after that invested in a capital market. Collecting money in a pool is basically the creation of a fund for the investor who invests in the fund or the “pool” becomes a part owner of the investment held under that scheme.
The mutual fund is a professionally controlled trust which gathers the savings of different investors and then invests them in securities, bonds or other financial market instruments. Mutual funds provide more diversification than an individual stock to the investor because investing in a single company is risky whereas mutual funds provide a stance to investors to play safe. This kind of funds are managed by the professionally qualified fund managers who oversee the fluctuations in the value of the fund and hence beneficial to the joint investors.
Basis of Difference
|Meaning||stocks are a collection of shares under the hold of investor that gives the investor the right to ownership||Mutual funds imply funds operated by asset management company. The investment of different investors is pooled in the fund and afterward invested in different market instruments|
|Ownership||In a company||In a mutual fund|
|Managed by||Investors||Mutual Fund Managers|
|Value||Price per share||Net asset value|