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Key Differences

There are some differences between directly investing and a Mutual Fund's managed investing

  Direct Investing Mutual Fund Investing
Control You choose the stocks, when to buy and when to sell. The Portfolio Managers make all the decisions on stocks and when to buy and sell.
Costs You pay small broker commissions. You pay fees to the fund managers.  There are many kinds of fees - more on that later!
Diversification When you buys shares in a company, your fotunes are tied to that one company.  If you want to diversify, you must spread the money between companies yourself. When you buy shares of a Mutual Fund, you are buying shares of an already diversified portfolio.  No additional work is required by you.
Time To build a diverse portfolio, you must spend time researching companies to determine the best fit.  Once you own shares, you must constantly monitor your portfolio to make sure it is performing well, and make changes when necessary. The Mutual Fund company has people constantly evaluating investment options.  They analyze the performance of the stocks in their portfolio to determine which stocks to hold and which to sell.  They also identified other investing opportunities.
Tax Reporting When you manage your own portfolio, you must carefully track every transaction to determine your capital gains and losses to report them to the IRS.  Mistakes can result in audits and tax penalties. The Mutual Fund company will handle all the paperwork, and give you your capital gains and losses on carefully prepared statements.