The Difference Between Stocks and Mutual Funds

Stock is the stocks into which ownership of an organization is divided ownership. In American English, all the stocks are collectively referred to as’stock’. Each share of stock represents fractional membership of an entity in percentage terms to the total number of outstanding shares.


The term ‘common stock’ is used, even though the manner of trading and market ownership varies from company to company. The shares outstanding represent a portion of overall ownership interest of an enterprise. Dividends are received by common stockholders and they are usually paid at a predetermined schedule or at a specified rate. Dividend payment is generally per share but it can also be decided on a quarterly or annual basis.

Within a corporation, a particular stock is preferred over other stocks. This means that in case of any loss or damage to the business, the shareholders will have to forgo their right to receive dividend from the corporation. Common stock has voting power and can be voted separately as well as combined with other shares for the purpose of determining the amount of dividends that the corporation receives. There are two types of voting power in relation to common stock. Majority and minority are the two types.

Majority voting is used when there is a great amount of shareholders who own the corporation. This means that a greater number of people own the stock so they will have the greatest right to decide on the dividends that the corporation receives. As a result, a large number of shareholders usually have control of how the profits from the stock market are distributed among the other shareholders. Dissentient shareholders cannot participate in the distribution of dividends. They have the choice not to participate in the dividends.

The other main type of stock is represented by shares without votes. This type of stock is sold through a broker to investors. If you are an investor and want to buy or sell shares, you can choose this option. There are many brokers who deal in these types of stocks and you can visit their websites to look for more information about them.

You can also choose to invest in mutual funds which represent the broadest possible base of stocks from different sectors. These stocks are usually bought and sold by institutional investors. Because of their size and investment potential, these stocks are ideal to be invested in by long-term investors. They offer higher rates of dividends and many investors find it easier to trade in these stocks as compared to the other types. Long-term investors also have the best opportunity to profit from the fluctuating stock prices of different companies.