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