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I am new to investing. I noticed that I can setup rules to auto-sell stocks (I don't know the term for this rule). I cannot auto-sell a mutual fund based on some criteria. So take a simple example. I own stock in AAPL & MSFT. I can setup rules to sell the stock if they drop by 2.00 a share. TD Ameritrade does not allow me to do the same task for my pretend mutual fund consisting of just these same two stocks.

I understand the mutual fund is divided among many stocks (and possibly other markets). I also understand that managing many stocks in a mutual fund is more difficult than one or two. In the simple case, does it make sense to invest in a mutual fund when seem to have more control over the stocks?

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In my opinion, the ability to set a sell or buy price is the least of my concerns.

Your question of whether to choose individual stocks vs funds prompts a different issue for me to bring to light. Choosing stocks that beat the market is not simple. In fact, a case can be made for the fact that the average fund lags the market by more and more over time. In the end, conceding that fact and going with the lowest cost funds or ETFs will beat 90% of investors over time.

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  • Data accessibility has changed dramatically since the internet. The long term comparisons I've seen go back to well before the internet. I believe an active portfolio is more manageable now that we have the internet. However, I would like to see empirical data on this.
    – P.Brian.Mackey
    Aug 30, 2014 at 13:21
  • I have to say that after months of research this is exactly the conclusion I've come to. Excellent answer.
    – P.Brian.Mackey
    Sep 20, 2014 at 0:51
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Exchange-traded funds are bought and sold like stocks so you'd be able to place stop orders on them just like you could for individual stocks. For example, SPY would be the ticker for an S & P 500 ETF known as a SPDR.

Open-end mutual funds don't have stop orders because of how the buying and selling is done which is on unknown prices and often in fractional shares. For example, the Vanguard 500 Index Investor shares(VFINX) would be an example of an S & P 500 tracker here.

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The issue with trading stocks vs. mutual funds (or ETFs) is all about risk.

You trade Microsoft you now have a Stock Risk in your portfolio. It drops 5% you are down 5%. Instead if you want to buy Tech and you buy QQQ if MSFT fell 5% the QQQs would not be as impacted to the downside.

So if you want to trade a mutual fund, but you want to be able to put in stop sell orders trade ETFs instead.

Considering mutual funds it is better to say Invest vs. Trade. Since all fund families have different rules and once you sell (if you sell it early) you will pay a fee and will not be able to invest in that same fund for x number of days (30, 60...)

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