What Has A Greater Return Potential? Stocks Held For More Than 10 Years Or Mutual Funds For More Than 10 Years?

Assuming both profits are reinvested for compound interest over the 10 years.

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This entry was posted on Tuesday, March 9th, 2010 at 11:28 pm and is filed under Stock. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

5 Responses to “What Has A Greater Return Potential? Stocks Held For More Than 10 Years Or Mutual Funds For More Than 10 Years?”

  1. You can do both but make sure the mutual fund company is not holding stocks that you own directly. I would invest in some no load low fee mutual funds with Tiaa-cref. They have been around for over 90 years.
    You can invest in Drips – buy stock directly and a good company that has many of the Drips programs is Buy and Hold.
    Below is an article about hold mutual funds vs individual stocks.
    Mutual Funds Vs Individual Stocks has always been a debatable issue. While some like to play safe with mutual fund investment, some others prefer investment in individual stocks.
    When any investor invests in any mutual fund all that he is required to do is pay the Shareholder Fees and Fund Operating Fees. The whole work of managing funds, starting from Market Research and analysis of stock and bond price and recent market trends up to final Allocation of Funds or assets in various stocks and bonds is completely done by the Professional Fund Managers employed by the Investment Management Company. In this case, the fund management remains in the hands of the fund managers of the mutual fund company. But, in case of Direct Investment in individual stocks, the total control remains in the hands of the individual investors.
    But, most of the people agree about the fact, that mutual funds hold some important benefits over and above Individual Stocks. So, to get the actual depiction of Mutual Funds Vs Individual Stocks,we will discuss the advantages put forwarded by Mutual Funds.
    Diversification
    The greatest advantage the mutual funds hold over individual stocks is the characteristic of Diversification. The core concept of mutual funds is to Diversify Investment in order to lower the risk of investing. As the mutual funds allocate their funds into stocks of different companies and in different bonds, the risk is diversified. If at a time, market price of some particular stocks fall, the loss of the mutual fund may be offset by the rise in price of some other stocks held by that particular mutual fund. But, individual stocks do not hold this advantage of diversification. If the prices of the stocks go down in the market, the investor is sure to lose money.
    Professional Management and Efficiency
    As mutual funds are managed by the professional fund managers who are specialized in their field, they carry out the research and analysis work much more efficiently and naturally speculate more correctly about the market trends of stock prices and bond prices. In the other case, Individual Stock investment is done directly by the investors who are in most cases common men who don’t have much knowledge about the stock and bond markets.
    Other than this as the mutual funds get a lot of money from people to invest in, they can reap the benefit of Economies of Scale with the large sum of invested money.

  2. The stocks should outperform the mutual funds, assuming they are picked with average intelligence. There are thee reasons for this. 1. The stock portfolio is not accumulating management fees of about 1.5% per year. 2. If the stock are not traded too often, you will not have to pay capital gains tax on them as you would on most mutual funds which just love to churn their portfolios. 3. It is much easier to manage a portfolio worth $5,000 to $2,000,000 than it is to manage a portfolio worth $1,000,000,000 to $20,000,000,000. Much, much easier. When you have a portfolio with so much invested you have no choice but to stock up on a bunch of crap.

  3. I hate to give you the non-answer, but I would say it depends upon the stocks or mutual funds chosen.
    In my opinion, the closer one gets to trying to make money quickly (i.e. penny stocks), the more risk involved. I am not a risk taker, therefore.. I recommend the Total stock market index which averages the highs and lows of all stocks across the market (not just the Dow.) Diversification, my friend. Diversification at it’s best.

  4. Using the key word “potential”…the answer is stocks on the face. However they have a MUCH bigger potential to lose money as well…..and lose MORE money.

  5. Individual stocks would have the greatest expected return, and also the greatest risk.

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