| Outlined below are some of the advantages and | | | | |
| disadvantages of mutual funds. Every | | | | But mutual funds also have features that some |
| investment has advantages and disadvantages. | | | | investors might view as disadvantages, such |
| But it's important to remember that features | | | | as: |
| that matter to one investor may not be | | | | |
| important to you. Whether any particular | | | | Costs despite Negative Returns: Investors |
| feature is an advantage for you will depend | | | | must pay sales charges, annual fees, and |
| on your unique circumstances. | | | | other expenses regardless of how the fund |
| | | | performs. And, depending on the timing of |
| For some investors, mutual funds provide an | | | | their investment, investors may also have to |
| attractive investment choice because they | | | | pay taxes on any capital gains distribution |
| generally offer the following features: | | | | they receive - even if the fund went on to |
| | | | perform poorly after they bought shares. |
| Professional Management: Professional money | | | | |
| managers research, select, and monitor the | | | | Lack of Control: Investors typically cannot |
| performance of the securities the fund | | | | ascertain the exact make-up of a fund's |
| purchases. | | | | portfolio at any given time, nor can they |
| | | | directly influence which securities the fund |
| Diversification: Diversification is an | | | | manager buys and sells or the timing of those |
| investing strategy that can be neatly summed | | | | trades. |
| up as "Don't put all your eggs in one | | | | |
| basket." Spreading your investments across a | | | | Price Uncertainty: With an individual stock, |
| wide range of companies and industry sectors | | | | you can obtain real-time (or close to |
| can help lower your risk if a company or | | | | real-time) pricing information with relative |
| sector fails. Some investors find it easier | | | | ease by checking financial websites or by |
| to achieve diversification through ownership | | | | calling your broker. You can also monitor how |
| of mutual funds rather than through ownership | | | | a stock's price changes from hour to hour - |
| of individual stocks or bonds. | | | | or even second to second. By contrast, with a |
| | | | mutual fund, the price at which you purchase |
| Affordability: Some mutual funds accommodate | | | | or redeem shares will typically depend on the |
| investors who don't have a lot of money to | | | | fund's net asset value, which the fund might |
| invest by setting relatively low pound | | | | not calculate until many hours after you've |
| amounts for initial purchases, subsequent | | | | placed your order. |
| monthly purchases, or both. | | | | |
| | | | Making any sort of investment involved a |
| Liquidity: Mutual fund investors can readily | | | | certain amount of risk so it is always wise |
| redeem their shares plus any fees and charges | | | | to seek the advice of a professional before |
| assessed on redemption at any time. | | | | making any decisions. |