I come across a lot of portfolios that have invested in individual shares. Typically these will have been held with a stock broker or discretionary manager (pretty much the same thing) in the past. Or it may be that the investor themselves has fancied a dabble or accumulated the odd share holding over time.
I thought it might be useful to have a quick overview of the difference between holding shares and holding funds in an investment portfolio.
- You invest in individual companies, one at a time.
- There is no ongoing cost of holding the share as such, but you may be charged admin fees by the platform provider.
- You have to decide which shares to invest in, and which sectors, and do all the buying, selling, research and analysis.
- You will typically have a portfolio bias towards UK Equities because they are easier to trade and more well known.
- You have a more focused portfolio which makes it higher risk.
- The fund will invest in individual shares and will hold sometimes up to 1000 or more shares.
- There is a cost of holding the fund as it manage the buying, selling and analysis for you.
- The fund will manage the decision making process of what shares are held.
- You can invest in 1000’s of company shares in different sectors, regions, countries etc. with just a few funds.
- You have a more diversified portfolio which lowers risk.