Everybody wants to be Gordon Geckko. People have seen the movie Wall Street and they want to live the exciting life of a Wall Street trader. You want to feel the rush of buying low and selling high, scoring the big trade. There is one catch though. To be able to make the correct trade, you will have to already know a lot about the market. Sure you read a couple of books and watched a couple of how-to videos. If only it were that simple. Most people have real-life jobs and will not have the time that it takes to be able to become knowledgeable enough to pick their own stocks. This is why some people use brokers. Using a broker to pick your stock will be very expensive. There is another alternative and that is to invest in a mutual fund.
If you invest in a mutual fund you will now have access to a lot of different industries all in one portfolio. A mutual fund is a group of stocks that you can purchase through an intermediary. You will pay one set price and this will give you access to a bunch of different stocks in several different sectors. Your money is gathered together with several other investors and is used to purchase these stocks. So instead of owning the whole stock by yourself, you now own a percentage of the stock. Stocks are not the only financial instrument that you will purchase when you invest in a mutual fund. Most funds will also include bonds, treasuries, and other financial assets. You will have access to all of this without having to pick any of it.
There is some downside to picking a mutual fund as well. Even though you will not have to do as much homework as you would normally have to do when picking your own stocks, there is some homework involved. Usually, the homework involves studying the mutual fund itself. You will want to know if they are a successful fund and how long they have been around. There are several funds that are out there that do not beat the index average. You will want to invest in a mutual fund that does have some sort of track record in beating the Dow Jones or S&P averages.
If you do have time to learn some of the intricate tricks of the stock market then maybe you would like to pick your own stocks. I would advise only picking up to five or six stocks to trade with. To successfully trade these stocks then you are going to have to do homework and any more than 5 or 6 will lead to a lot of homework. You will want to make sure that you take the activity of picking stocks very seriously if you want to make any money at all on the trade.
If you would like to pick your own stock or use a mutual fund both cases are a good way to get into the world of investing. Before you put any money down, make sure that you are going to have the time needed to be dedicated to your pick. If you don’t then you will be flushing money down the drain.