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What comes to mind when the word investment is mentioned, and how often do you invest? Investing involves outlaying a good, an asset, or a project in the hope of reaping a bigger payoff in the future. It may also come in the form of pursuing higher education; the goal is using the acquired knowledge and skills to improve productivity.

However, the thought of investment can be overwhelming for beginners. Nonetheless, this should not be a source of cutting off your dream of investment. This is because there are financial institutions, which offer investment accounts with an additional privilege of the ‘do-it-yourself’ option.

Do you need a brokerage or a mutual fund account to execute your investment activities? 

Today, discount brokers and mutual fund companies are the primary players in offering investment choices. They both have their pros and cons; hence, it is important to carry out an all-inclusive comparison before investing. They have some similarities given that they are both investment tools but read below the notable differences: –

  • Their structures are the key difference. Brokerage accounts are not regarded as investments; instead they are termed as accounts for holding investment. On the other hand, mutual funds hold securities.
  • Mutual funds have an initial investment fee of about $100 on the lower side and $3,000 on the higher side. Brokerage accounts do not attract any investment to open
  • The operational fees are different too. For a brokerage account, it is all about the trading costs, which involve commissions. For mutual funds, it is all about sales charges.
  • A brokerage account is more flexible because an investor can apply multiple security types. This is not possible with mutual funds.

The following similarities make them more interesting: –

  • More often than not, they face the same taxation on capital gains, interests, and dividends.
  • They both feature diversification though it is heavily determined by the investor who can choose a narrowly concentrated or a broadly diversified type of investment.
  • They are professionally managed but only if they are bought from a fully – serviced brokerage firm

The bottom is understanding your investment needs and pursuing them through the right channels.