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Lesson 2. Why You Should Invest in Stocks > Stocks vs. Mutual Funds - Pg. 12

Why You Should Invest in Stocks 12 What it boils down to is this: First make sure you have sufficient cash on hand for any emergency. Cash accounts, used this way, should take priority over investing in stock. Once you have collected what you consider to be sufficient cash, however, don't let future income just laze around in your cash accounts; put it to work in the stock market. Stocks vs. Mutual Funds The recent rise in the popularity of mutual funds has brought them under wider and more substantial scrutiny. Many people are discovering that mutual funds are an excellent investment option, but stocks are still better. Plain English A mutual fund is a mass portfolio that has been collected by a mutual fund manager and is professionally managed for its owners or shareholders. A mutual fund can be composed of any combination of investments, or it can focus on only one investment vehicle--stocks, for example. In fact, the vast majority of mutual funds are totally com- posed of stocks, or at least contain some stocks in their composition. It would appear, then, that investing in a mutual fund composed of stocks would differ only slightly from investing in the stocks themselves. To some extent, this is true. But because mutual funds come as a package deal, there are substantial differences between the two as investments. First, you lose a lot of control over the mix of your investments. When you purchase a share of a mutual fund, you purchase a portion of each of the stocks in the fund. You cannot sell off any stock in the mix with which you are not comfortable, nor can you add stock that you think might be a valuable asset to the fund. Of course, you could always buy that stock on your own, but then you