What is the difference between investing in a stock and investing in a mutual fund.

Expert Answers
pohnpei397 eNotes educator| Certified Educator

When you invest in a stock, you are buying a piece of a given company.  By contrast, when you invest in a mutual fund you are shares in the fund, which is in turn made up of many different stocks.

Mutual funds are managed by professionals.  The professionals decide what individual company stocks (or things like bonds) to buy for the fund.  The fund holds stocks from many different companies.  When you buy into the mutual fund, you get a portion of the fund's whole pool of stocks.  You are not just buying stock in one company.

Mutual funds are typically a more conservative investment strategy.  You hedge your bets by buying stock in many different companies and you also allow a professional to pick the stocks for you.