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The Advantages And Disadvantages Of Mutual Funds

1493 Words6 Pages

A Mutual Fund is an investment vehicle that is made up of a pool of funds collected from many investors for the purpose of investing in securities such as bonds, stocks, money market instruments and identical assets.
Advantages:

1. Liquidity An advantage of mutual funds is the ability to get in and out with relative ease. In general, you are able to sell your mutual funds in a short period of time without there being much difference between sale price and the most current market value.

2. Diversification
By purchasing mutual funds, you are provided with the immediate benefit of instant diversification and asset allocation without the large amounts of cash needed to create individual portfolios

3. Professional selection of individual securities
When you by a mutual fund, you are also choosing a professional money manager. This manager will use the money that you invest to buy and sell stocks that he or she has carefully researched.

Disadvantages:

1. Poor Performance
Returns on a mutual fund are by no means guaranteed. In fact, on average, around 75% of all mutual funds fail to beat the major indexes and a growing number of critics now question whether or not professional money managers have better stock-picking capabilities than the average investor.

2. Lost of control
The managers of mutual funds make all of the decisions about which securities to buy and sell and when to do so. This can make it difficult for you when trying to manage your portfolio.

3.

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