Stocks vs. Stock Funds

I don’t know if i have already covered this in another post but stock funds are a basket of stocks and foreign stocks. Whereas individual stocks are exactly how they sound. Individual shares of an company.

Stock funds are great for long term growth. It has a somewhat “set it and forget it’ type attribute to it. Beware though, just because you can, “set it and forget it” doesn’t mean you should, actually you should not. With stock funds, its best to rotate out of them periodically(not every month of course). So that you can keep an eye on what funds are achieving YOUR goals, and what are poor performers.

One way of doing this is set a limit on how much you are going to contribute to a fund. Say for instance we are investing $2,000 in the Vanguard Star Fund. put $5,000 as your limit in the fund. Once it get to $5,000, use the gains that you received from the first fund and put them into another fund.

Often times i see people just buy mutual funds that have no personal purpose except for diversification. Each fund should have a purpose, and should be used according to that purpose you have set forth financially.

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