Price Points

• One big disadvantage of mutual funds is that they are priced at the end of each trading day. That makes it impossible to truly determine how much you are paying for the fund when you buy it, and how much you will get when you sell. If you are unlucky enough to buy on an up day in the market and sell on a down day, you could significantly reduce the amount of profit you make on the fund, even if the overall performance has been very good.
  
  

Tax Advantages

• When you hold your stocks through mutual funds, those funds generate capital gains every year, and you must pay taxes on those capital gains payments the entire time you hold the fund. It is important to note that it is possible for a mutual fund to generate capital gains even when it has had a losing year, so you could conceivably owe taxes even if the balance of your fund has gone down. But if you hold individual stocks, you do not have to pay a capital gains tax until you actually sell the stock for a profit.
  
  

Potential Appreciation

• If you choose individual stocks wisely, you can enjoy a greater level of appreciation than you could get with a diversified mutual fund. Of course there is no way to predict ahead of time which stocks will do the best, but if you are skilled at researching companies, reading financial disclosure documents and evaluating company performance, you might be able to beat the average mutual fund by a wide margin.
  
  

Current Income

• If you choose individual stocks based on their high dividend yield, you can enjoy a steady stream of current income as well as the potential for future appreciation. While you can buy mutual funds that invest in dividend paying stocks, the overall yields on those funds are often less than you could get on your own by building a portfolio of blue-chip stocks that pay a dividend and have a history of consistently raising their dividend payouts year after year.