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Individual securities versus funds – the differences explained using the example of shares

24.04.2018

The main differences between shares and funds that investors, or anyone thinking about investing, need to be aware of.

Investors can always choose between putting their money into individual securities or into a fund. Individual securities include, for example, shares in a particular company, federal government bonds or bonds issued by a particular company.

A fund is a basket containing a number of different securities. It is usually put together with the focus on a particular area, such as a sector, region, type of security or various other priorities.

Using the example of shares and equity funds, we illustrate the key differences between individual securities and funds that investors should be aware of.

The differences between shares and equity funds at a glance

Individual shareEquity fund
Individual share
Management
Independent management. Investors should also consider whether a share is undervalued or overvalued, i.e. whether the current price is lower or higher than the share’s estimated intrinsic value.
 Equity fund
Management
Professional management by fund managers.
Individual share
Risk
Investing in a single security increases the risk as there is no diversification.
 Equity fund
Risk
With funds you invest in a variety of assets, for example, in different sectors, currencies or countries etc. This enables risk concentration to be reduced inexpensively. A fund is diversified even if it focuses on a single sector as investment is made in 30 to 50 different shares depending on the fund.
Individual share
Diversification
Not diversified.
 Equity fund
Diversification
An investment can be diversified even with a relatively small amount. Investing from CHF 20 a month is enough.
Individual share
Gains and losses
Gains may be very high if the share price rises sharply – but, equally, the same also applies to losses.
 Equity fund
Gains and losses
High gains from individual shares have less effect in a fund containing lots of shares –  and it is exactly the same for losses.
Individual share
Dividend payment
Dividends are paid directly to shareholders.
 Equity fund

Dividend payment 

The dividends are either paid out (distributing fund ) or directly reinvested (accumulation fund ).
Individual share
Costs
Anyone who purchases shares independently pays a brokerage fee to the stock exchange where the security is traded – this is generally between CHF 25 and CHF 350 depending on the size of the order and the stock exchange. In addition, there is stamp duty.
 Equity fund
Costs
A custody account is also required to invest in funds. To purchase funds, you pay an issuing commission which at PostFinance, for example, stands at between 0.5% and 1% per transaction. In addition, there is stamp duty. Depending on the bank, you also pay commission when you wish to sell fund units.
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